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Frost & Sullivan report: Marketing in the hot seat

6th Mar 2009
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As marketing budgets are under scrutiny and the pressure to drive growth increases, Frost & Sullivan analyst Keith O'Brien looks at the key trends in marketing effectiveness.

By Keith O'Brien, Frost & Sullivan

Marketing executives have rated the global economic downturn as the top primary environmental factor impacting their marketing strategies in 2009. However, there are still opportunities to support growth if the focus is on new markets and innovation.

A survey by Frost & Sullivan's growth team membership division highlights that marketing in Europe and North America has to operate amongst greater competition, spurred by the contraction in customer demand. Nevertheless, the recession is providing some growth opportunities, especially in emerging markets, customers' appetite for enhanced products and services, and innovation in green and sustainable offerings.

Business Environment Factors North America European Union
Global economic downturn 64% 47%
Decreasing customer demand 24% 19%
Intensifying competition 21% 17%
Emerging global markets 17% 11%
Increasing need for product/service innovation 14% 28%

Key marketing issues

While there is some variation in the key issues shaping marketers' decision-making in North America and the EU, there are a number of shared challenges, including the need for marketing to justify its expenditures and demonstrate how such investments contribute to the company’s bottom line.

In addition to the push for accountability, there is pressure on the function to create new sources of growth for the company. Innovation is a key area of focus for executives, at the front-end through better detection of up-and-coming customer needs and priorities to enable the refinement and development of more powerful value propositions.

Marketing must also fast track the introduction of new products and services that match shifts in customers' buying behavior. Lastly, and especially for the European executives, there is a need to help prioritise the company's innovation investments in an environment where short-term financial pressures are unavoidable. But on both sides of the Atlantic, executives are being tasked to find untapped market opportunities wherein companies can serve high value customer segments.

Marketing Issues North America European Union
Measuring market spend effectiveness and efficiency 30% 16%
Identifying emerging customer needs and preferences 30% 21%
Justifying the ROI on marketing budgets 28% 29%
Enhancing the pace of new product and service introductions 25% 24%
Identifying new, adjacent market opportunities 23% 24%
Evaluating and prioritising innovation investments 18% 29%
Improving Sales and Marketing integration 18% 26%

Survey respondents were asked to identify whether their top three issues were primarily an issue of staff, technology or process. Overwhelmingly in North America, respondents identified 'process' at the crux of their top three issues. In the EU however, 'talent' was also identified alongside 'process' as being the main factor.

How effective is marketing?

When asked about the effectiveness of their marketing function, only 3% of North American and 4% of EU respondents rated it as exceptional. In total, 61% of North American executives rated their function's effectiveness as good and almost 30% rated it fair or poor. In contrast, a majority of EU marketers (47%) assessed the effectiveness to be fair, while 45% rated it as good.

To put this into perspective, the majority of North American respondents (70%) work for public companies and more than 90% operate in a B2B environment, whilst 60% work for firms with revenues higher than $1bn. Conversely, 55% of EU respondents are from privately held companies and 98% of the European marketing executives work in B2B companies, whilst 57% of respondents report working for companies with revenues higher than €700m.

The largest number of respondents was in the healthcare and life science industry (29% in Europe, 20% in North America). In Europe, this was closely followed by the automotive and transportation industry (27%), whereas it was the information and communication technologies industry in North America (18%).

In summary, the global economic downturn is having a tremendous impact on marketing decisions. Marketers have to justify their budgets as companies squeeze spending in light of firm-wide cost management initiatives and dramatic shifts in customer demand. At the same time, marketing is under pressure to spur growth opportunities whether through finding new markets or developing innovative products and services.

And this pressure could be telling as many feel the effectiveness of their function could be improved.

Keith O'Brien is director of the growth team membership at Frost & Sullivan. This is an annual subscription programme that supports individual members of a CEO's executive team in achieving the company's top-line growth objectives.

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