A recent research report by Percolate provides interesting insights regarding the changing composition of marketing costs and explains why the effective management of marketing operations is critical for large business enterprises. The Hidden Cost of Marketing: The 2016 Non-Working Spend Report is based on a survey of 305 enterprise CMOs, VPs, and Marketing Directors in the United States representing a wide range of industry verticals. Over half of the respondents were with enterprises having more than $1 billion in annual revenues.
The primary focus of this research was the growth of non-working media expenses. For this study, Percolate defined working spend as the amount spent on the distribution of marketing content across marketing channels, including traditional channels such as TV, radio, and print, and digital channels such as email, social, and mobile. Non-working spend is everything else – the costs associated with creating or producing content, operating the marketing function, and measuring marketing effectiveness.
This study found that, on average, non-working spend consumes 40% of advertising budgets and 20% of the total marketing budget. The three industries with the highest levels of non-working spend (as a percentage of the total marketing budget) were professional services (24%), consumer package goods (23%), and retail (19%).
Almost two-thirds (62%) of survey respondents said that non-working spend grew or grew significantly in the past year, and 51% of respondents expect non-working spend to increase or increase significantly in the next year. Overall, 50% of respondents agreed or strongly agreed that the share of non-working spend in their advertising expenses is too high, but that percentage increases to 61% for CPG respondents, and 60% for retail respondents.
The survey also asked participants to identify the most significant drivers of non-working spend, and the top three responses were:
- Emergence of more expensive media formats (41% of respondents)
- Brief creation, planning, and media evaluation (41%)
- Employee talent costs (35%)
When survey participants were asked what actions provide the biggest opportunities for controlling non-working spend, the top response – selected by 47% of respondents – was creating better internal creative workflows and processes.
Over the past few years, a great deal of attention has been focused on leveraging data, analytics, and personalization technologies to deliver outstanding experiences to existing and potential customers. The findings of the Percolate research should remind us that managing the operational aspects of marketing remains critical to controlling marketing costs and improving the financial performance of the marketing function.