Leading marketing executives are increasingly relying on social media in their overall marketing strategies, a new survey indicates.
The 249 CMOs of U.S. companies who took part in survey noted they intend to increase their current level of spending on social media from its current level of 7.1 percent of their overall marketing budget to 10.1 percent over the next year. They expect to see this number rise to 17.5 percent in the next five years.
"These findings dispel the notion that social media is just a fad," said Christine Moorman, the T. Austin Finch Senior Professor of Business Administration at Duke's Fuqua School of Business and the director of The CMO Survey.
"Social media is fast becoming an important strategic weapon in company arsenals and has proven to be a valuable tool in acquiring and engaging customers. Effective use of social media is no longer an option for companies -- it is a requirement. Going forward, companies which most effectively deploy social media will be best positioned to serve their client bases, particularly as digitally-savvy customers assume a greater percentage of buying power."
There were differences in the percentage change across sectors. Business-to-consumer marketing of a product reported the greatest anticipated increase over five years -- to 24 percent of the overall marketing budget. That number currently is 10.5 percent.
At the same time, marketers admitted they have a ways to go toward integrating social media in their strategy. On a scale of 1-7, with one being "not integrated at all" and seven being "very integrated," almost a quarter of marketers (22.3 percent ) selected "one" to describe how well their company's social media is integrated with the firm's overall strategy.
The number was only slightly better for integration within the marketing strategy -- 16.9 percent selected "one" for this question. Only 9.1 percent chose "seven" for social media being integrated within the company's strategy (the average was 3.4) and 12.8 percent selected "seven" for the marketing strategy (the average was 4.0).
"Social media is not an add-on or after-thought," Moorman added. "However, until executives understand social media well, it is difficult for them to think strategically through the lens of social media. This will take time.
"It is also important that companies keep spending on social media among internal groups and not outsource it. Outsourcing increases the likelihood that social media and strategy will not be integrated."
The survey also found that executives are planning to increase spending on all forms of marketing. This is despite the fact that the survey was conducted from Aug. 1-23, a time frame marked by the S&P downgrade of U.S. credit and a Congressional battle over the debt ceiling.
Marketing budgets are expected to increase 9.1 percent and companies plan a 7.2 percent increase in marketing hires over the next 12 months. The latter figure is up from 6.2 percent when asked the same question in February 2011.
At the same time, optimism among marketing executives for the overall U.S. economy reached its lowest point in two years. When asked: "How optimistic are you about the overall US economy on a 1-100 scale with 0 being the least optimistic and 100 the most optimistic" the overall average of respondents was 52.2. The lowest time before this was in February 2009, when the average was 47.6.
Explaining this apparent paradox, Moorman said, "It is important to note that the company performance indicators collected in the survey show companies are holding on to their profit, revenue and ROI gains witnessed over the last six months."
These results show that while executives feel the fear of all the doomsayers operating in financial markets, these same executives are reporting positive performance gains and are spending despite the negative news. I conclude that these sources closer to company operations, especially in revenue and demand-generating activities like marketing, are trying to tell us that market reactions over the past month may be grossly exaggerated."
Several other indicators in the survey point to how managers might continue to perform well despite tough times. Results indicate that more firms are planning to go directly to the customer, presumably through the Internet (from 8.4 percent to 11.2 percent planned in the next year); expand sales to international markets where growth has not stalled out (from 18.7 percent to an expected 24.7 percent); and spend to ensure their business stays close to their customer and uses customer insights to drive strategy.
The CMO Survey is conducted two times per year (August and February). Learn more at https://www.cmosurvey.org/results.