Marketers will dramatically increase their budgets for social media even as they have difficulty showing its effectiveness, a new survey shows.
The 408 chief marketing officers who took part in The CMO Survey said social media is expected to grow from 7.4 percent of their total marketing budget today to 18.1 percent during the next five years.
At the same time, 49.2 percent of marketing leaders state they do not have proof that social media is helping their performance. Only 15.9 percent of firms said they could show quantitatively that social media impacted performance, while 34.8 percent said they have a good qualitative sense of the impact.
"Spending on social media has outpaced its measurement. As we enter the next chapter in the evolution of this emerging area of marketing, I predict that we will see more companies designing research to give them insights into what is and is not working," said Christine Moorman, a professor at Duke University's Fuqua School of Business and director of The CMO Survey. "CMOs report they spend 3.5 percent of their budgets on measuring return on investment. This level will increase over time as will the number of companies using experiments and sophisticated econometric models."
Results show that firms are bolstering their marketing budgets overall. Consistent with the rise in social media spending, spending on digital advertising continues to outpace traditional advertising, though the growth in digital spending has slowed from a high of 12.8 percent in February 2012 to 8.2 percent in the coming year.
CMOs anticipate a 72 percent boost in spending on marketing analytics during the next three years, but only 32.5 percent of firms currently use the analytics they have available or have requested.
And only 7.5 percent of companies say they rated the contribution of marketing analytics to their company's performance as "very high." Survey results point to one challenge for companies --finding the right talent to leverage the full potential of marketing analytics. While almost 40 percent of CMOs reported adding marketing analysts, nearly 80 percent reported it was very or extremely challenging to do so.
"Working marketing analytics into the way marketers and other managers make decisions is a process that many companies have not invested in," Moorman said. "How, when and why this occurs must be answered, and formal and informal procedures to do so need to be grafted into the organization. When this happens, the use of marketing analytics will improve."
Meanwhile, CMO optimism for the U.S. economy reached its highest point in five years -- 66.1 on a scale of 0 to 100, where 100 is most optimistic. In February 2009, CMOs optimism was at a low of 47.7. Reflecting this current outlook, marketers expect improvements in key customer metrics, including increased customer acquisition, purchase volume and customer retention. Likewise, CMOs predict a shift toward a focus on product quality and away from low price.
"This five-year high and its corresponding customer mechanisms is excellent news for the economy," Moorman said. "We have heard analysts and policymakers talk about recovery. This evidence from those interacting with customers making purchasing decisions is a strong testament to how far we have come in this recovery."
The survey is the 11th conducted since its founding in August 2008. The survey, which was sent to 4,582 top U.S. marketers between Jan. 14 and Feb. 4, is sponsored by McKinsey & Company, the American Marketing Association and Duke's Fuqua School of Business. For full reports associated with survey results, visit www.cmosurvey.org/results.