Lee Odden

Should Marketers Shift Offline Budgets to Digital Marketing?

Lee Odden     Online Marketing

shift marketing digitalYou don’t have to look much further than recent headlines and research studies below to see that many companies are losing confidence in traditional marketing and advertising.  

The changing trends in information production, distribution and consumption coupled with the uncertain times we live in create an unprecedented challenge for companies to better reach and engage with customers.

Whether changes in marketing direction are motivated in response to market and industry conditions, changing consumer behaviors or the need to stay competitive and cost effective, one thing is certain: companies that don’t nail down marketing efficiencies and customer retention are in for a long, cold winter.

Here are a few recent headlines and studies of interest:

Integrated Marketing Media Mix’ Study: More Digital with Mainstay Traditional: “As marketers integrate their media campaigns, they are adding email and other digital media in ever-increasing numbers – though offline media remain vital to integrated campaigns, according to “the Integrated Marketing Media Mix”” 
DMA Study via Marketing Charts

NCDM Database marketers need to innovate, explore multichannel options: “Tim Suther, senior VP at marketing services company Acxiom, agreed, stressing the need for database marketers to extend their skills into digital marketing.” 
BtoB

Direct Marketing to Account for 53% of U.S. Ad Spend in 2009 Growth for Interactive Marketing:  “Expenditures in the newer online media will maintain significant growth in the coming year. Commercial email will continue to claim the top growth ranking for 2009, while internet advertising will claim more than 15% of all direct marketing advertising dollars in 2009.” 
DMA Power of Direct Marketing’ Report

Survey Finds Pharma Marketers Poised to Embrace Digital: “The pharmaceutical industry is behind the curve in many areas of digital marketing, but it is likely to make a significant leap ahead in the coming year. That is the conclusion of “Digital Marketing in Pharma”, a new survey from MarketBridge, in conjunction with Pharmaceutical Executive magazine.”
ClickZ

Economy Shrinking 65% of CMO Ad Budgets, Money Shifts toward Digital: “Nearly two-thirds (65%) of CMOs and marketing execs say their ad budgets will decrease because of the troubled economy, but more of their money will go toward digital/interactive marketing than before
epsilon CMO Study via Marketing Charts

Digital and Direct Orange boss urges total budget switch to online:  “Speaking at the annual IAB Engage conference, held last week, Billingsley made the case for advertisers to transfer all their budgets to digital. He also accused ‘archaic executives’ of wanting to see their creative work on TV, thus holding back the inevitable shift toward online marketing.”
Brand Republic Marketing

Research and opinions in favor of digital marketing are pretty clear: Invest marketing and advertising budgets in internet and mobile or face the consequences of failure. That’s a bold statement, but is it really true?

While presenting at last month’s Social Media Smarts Workshop in New York, I offered the question, “Should marketers shift budgets from offline to digital?” and then posted the question to LinkedIn as both a demonstration of how the “Answers” feature worked and to get the pulse of the LinkedIn community on the topic. Replies were compelling and here are a few I’d like to highlight:

Lynne Mysliwiec – VP, Analytics at Epsilon Data Management:

My opinion is that media budget allocation should be commensurate with ROI in the short term (immediate sales driven) and long term (quality/value of customers transacting in a channel after some time frame). Budget allocation should also be consider immediate marketing needs. For example, if you’re planning a new product introduction, cutting mass back to nothing will probably jeopardize or delay the ultimate success of this new product. It would make sense to drive brand-based and/or product-introduction investments toward mass media to give your new product a fighting chance or you will have to adjust your expectations for penetrating the new markets the product was designed for. 

Since the impact of mass media on sales tends to be less measurable than direct-response media, in a downturn one expects that many mass-media budgets are slashed in favor of measurable media, although often those budgets are cut as well. 

ARE people pulling out of advertising and print-based DM and allocating dollars toward digital for 2009? Yes they are, although many are using cost cutting as the primary thought process behind that migration rather than data-driven thought-processes and will re-think those decisions as their businesses exit the recession.

 Jim Gilbert – Direct Marketing Professional, Author and Professor:

The answer is in understanding your metrics. If you have traditional programs that are working, keep them. Test, if you can, integrating off/online with personalization techniques like PURLS. 

Furthermore, the more the online shift, the better for direct marketers using traditional vehicles like mail and catalogs. Less mailbox clutter, more visibility for messages that are relevant to the consumer.

Dan Gershenson – Creative Director at The Creative Underground: 

To me the question has to start first with how your target audience is behaving based on the latest research you have about them. Which makes the answer a case-by-case situation rather than a blanket statement of “go more digital”. Now, if it appears for example that your target is comprised of heavy web users that only marginally read magazines or newspapers, then the shift to more digital is warranted. But just because the world has more Blackberrys and iPhones in it these days doesn’t mean that there aren’t audiences that have special relationships with print or direct mail.

What you have to discover is if your target is one of them based on how the demographic and psychographic information is trending for that specific group. In all likelihood, I wouldn’t doubt it if in most cases you’re talking about a suitable mix of the two because it’s not often realistic to say certain groups use all of one form of media anyway. Sure, the media attention is going to continue to show its love for digital. But show some love for your audience first before you get swayed too much by the press.

Lynne, Jim and Dan make a pretty good argument for making sure companies rely more on data than the headlines to make decisions about moving marketing budgets.  Company marketers will never get the data from digital marketing without testing, so I would encourage those who have not historically leveraged search, social media, mobile and other interactive advertising channels to do their homework (or have an agency help them) to establish a digital marketing roadmap and start testing and capturing data.

You can read a good post about direct marketing compared to social media marketing here as a tactical primer.

What do you think? Is your company moving more budget to digital marketing efforts ? (Internet, mobile, display). If you work within an agency, are you seeing more clients move towards or away from digital marketing programs? What tactics are you emphasizing for 2009?

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Lee Odden About Lee Odden

@LeeOdden is the CEO of TopRank Marketing and editor of Online Marketing Blog. Cited for his expertise by The Economist, Forbes and the Wall Street Journal, he's the author of the book Optimize and presents internationally on integrated content, search, social media and influencer marketing. When not at conferences, consulting, or working with his talented team, he's likely on a beach somewhere doing absolutely nothing.

Comments

  1. Social media will become media, it will start to get integrated with main stream media in 2009. This will lead to budgets moving to digital media.

    • That’s a good point Samrat. Newspapers are folding and other traditional media are feeling the pinch to move online. Budgets will follow audience.

  2. I think the main problem right now is that companies don’t really understand the power of digital marketing. Especially the following point: You can track your digital marketing much better than you can track offline marketing. When businesses will understand that, it’ll explode.

    I think 2009 will be an important year for that as more businesses will understand the power of blogs, social medias, online marketing, etc.

    • Many companies will have no choice but to better understand digital marketing in 2009 because their competition certainly will.

      It can be confusing for organizations to figure out where to start and maybe that’s why so many hold off. It’s hard to go wrong with a foundation of search and basic social media marketing in my book.

  3. As all of us know, digital (online) marketing is more measurable than offline marketing.It therefore allows marketers to have a better track of their marketing spend and ROI. But as Dan said, it may not be applicable to all. It will actually depend on the target audience and the media that has the most exposure to this target segment.

    Also, as rightly pointed out by Dan, not one media can make-up the marketing mix. The marketing mix will have to be a collation of various media. Its composition will largely depend on the exposure of each individual medium to the target audience. Get the marketing mix right and you have yourself the widest reach amongst your intended audience.

    • Maybe the question of budget offline or online should really be, what’s your offline/online marketing mix?

      Certainly there is a significant opportunity for companies that have traditionally spent their ad/marketing dollars offline to be educated on how they can start testing a digital marketing program.

      That’s part of the reason why TopRank is working with the DMA on the Social Media Smarts Strategy workshop. http://cli.gs/socialmediasmarts

  4. Daniel Riveong says:

    Lee,

    Definitely agree with the responses you quoted from LinkedIn. We all know the consumption of media is fragmenting and even the term “interactive marketing” is a catch-all term that can mean anything from iPhone Apps to Paid Search to a Viral Flash Game on a minisite.

    There’s a great PDF chart of this at:
    http://rossdawsonblog.com/Seven_Forces_Media.pdf

    As Lynne Mysliwiec hits the mark:
    “My opinion is that media budget allocation should be commensurate with ROI in the short term (immediate sales driven) and long term (quality/value of customers transacting in a channel after some time frame).”

    However, Agencies and Clients seldom have the luxury of a multi-channel data-driven marketing campaign. Budgets, bureaucracy and logistics are the many forces that can tear the delicate need for a such a campaign.

    This is something at e-Storm we strive to do – we’ve even argued to preserve some offline marketing budgets instead of shifting the budget to online (which we would profit from) because we know that for many companies a proper balance is needed between multiple media channels.

    I think we’ll see more people demanding short-term ROI goals which will translate a shift to paid search. But honestly, this is not effective for all clients – sometimes mass-media branding is needed, other times, a targeted sponsored email list can be more ROI-effective and so on.

    • What an insightful comment Daniel, thanks.

      Your point, “Agencies and Clients seldom have the luxury of a multi-channel data-driven marketing campaign. Budgets, bureaucracy and logistics are the many forces that can tear the delicate need for a such a campaign” is something a lot of full service agencies can relate to.

      Despite the roadblocks, politics and legacy mindsets, we’ve got to start somewhere. Keeping the client’s best interests in mind, which is surprisingly an exception at some agencies besides e-Storm and TopRank, involves whatever marketing mix makes sense short and long term to reach objectives.

      Paid search might be a shot in the arm for short term, and sometimes desperate lead gen needs, but without a data driven approach that involves education and long term commitment to a strategy that may involve offline and digital, I’m not sure how a lot of organizations will be able to upgrade themselves to digital marketing opportunities before it’s too late.

  5. Interesting article. There is no doubt that online marketing is much more effective.

  6. Eventually companies will realize offline & digital marketing mix well and begin to make this the norm.

    [For example: Attend a live event filled with the clients ultimate prospects. Set up a demo and offer a few giveaways. Point the prospects to the clients blog for more info and sales page for purchase. Take lots of photos & get some video for the blog.]

    I have seen this done many times but, in line with what Ben said (above), offline success is hard to track so businesses don’t realize that a significant portion of the traffic they get was hatched from an offline interaction.

    • Exactly Tom. Offline publicity and advertising drives a lot of online activity, but that’s difficult to track.

      @melaniemitchell commented on Twitter, “In a recent Jupiter Media study, for example, showed that 67% of traffic is driven online after an exposure to offline”.

      That’s a pretty compelling statistic.

  7. I think that many companies are not expose to online marketing and because of that they are left behind. These day people are always online they buy online. Chat online. Sell online. Digital marketing is and it

  8. We’ve been exclusively in digital media for over 10 years now, and we are definitely seeing companies make the exodus from traditional to online – and it really appears to be more of a shareholder move than anything. Yes, they want accountable results as does anyone, but with tight budgets, and marketing being one of those easily adjusted budgets – the move to interactive comes faster than ever. The problem that we’re going to start seeing (and I am a true believer in interactive – so don’t take this as a comment that I’m trying to save my local newspaper from going out of business) is that interactive results are going to fall off dramatically – and the reason is twofold: 1) There is going to be more competition than ever creating more and more clutter than ever before and 2) the lack of a true marketing mix is going to take it’s toll. Just like search engine marketing doesn’t operate in a vacuum – neither does interactive. Your marketing mix needs to be solid. If you can prove that interactive gets the lions share of the budget – then good for all of us in interactive – but prove it – don’t just do it because your investors are preaching accountability!

    That all being said – addressing point one about clutter… Now is as good of time as ever to get involved with the IAB – as they are going to be pivotal in a move to interactive and it is currently publisher dominated. Let’s get some agencies and clients involved as well.

    Great article again Lee – keep em coming!

    • Thanks Michael. This post and set of comments is a classic example of the comments being where the gold is. Thank you for your insights.

  9. Great post and comments! I agree with Ben – most people don’t understand online marketing. Nor do marketing managers understand the project planning and resources required to use it effectively (i.e., testing, persistence, etc.). Also, offline media (DM, print) that is working “works better” when integrated with online media; not to mention you can reduce your ad spend in print (smaller ad, etc.) and deliver the content/message and close the sale online much more cost-effectively now.

  10. Chris Carpenter says:

    Great Post Lee. I think it’s a more complex question for many organizations (especially really big ones). There are two things that need to be considered as these decisions get made and both are highly dependent on data.

    First, understanding the appropriate media mix needed to maximize campaign effectiveness. There is plenty of research out there now that indicates a mix of on/offline media produces the most impact, companies need to invest to find out what that mix should be.

    Second, understanding which tactics fit best at which stage in the lifecycle. TV and print is great to launch new product and get awareness, but digital will be a place to drive activation and ultimately give a forum to brand evangelists.

    Bottom line is that there is plenty of room for all media channels. Marketers just need to figure out how to maximize each.

  11. Thanks Chris. I completely agree with you, “companies need to invest to find out what that (marketing) mix should be.” and “understanding which tactics fit best at which stage in the lifecycle”.

    That’s smart marketing, lemmings be dammed. 🙂

  12. So many comments here are so accurate!

    My own firm has been working deeply in the financial industry for many years. That’s an industry that suffers terribly from marketing restrictions. Thus, the people and firms inside it do not keep up with digital marketing that the rest of the world is experiencing.

    To financial people, brochures and post cards continue to be important marketing. It’s a brick-n-mortar mentality in a digial world.

  13. This is a great post and an equally wonderful set of comments.

    I’ve seen many companies try interesting ways, like paying research firms such Claritas to crunch demo data, in an attempt to come up with an effective marketing mix – albeit fairly unsuccessfully.

    The truth is that companies should be testing their way into the ideal mix based on their own brand’s positioning. Too often we see marketers relying on 3rd party data and saying things like “so and so spent 10% in digital in Q3 so we should look at something around that level as well if possible.”

    But due to factors like consideration and awareness, every company is going to need to first determine where they are positioned in the minds of potential customers, if at all, and then go from there. Only testing will tell where your brand sits.

    You’ll never get to the point of establishing credibility, delivering proof points, deep-dive Q&A, or earning “trusted partner” status without first creating awareness. I think a holistic approach combining traditional and digital is the only way to get to that point.

  14. Lee this very important new year, that will determine how universal business will be conducted far into the future, is starting off very productively for the readers of your blog. Great post and wonderfully insightful comments. I feel sorry for anyone not listening to this conversation

  15. Great article mate.

    I agree, digital media is slightly different to traditional media. Sure, it might be a whole lot less cluttered right now, but at the end of the day it depends on what works for you as a marketer.

  16. Racheal A. O'Keefe-Mack says:

    Digital Media is part of the new rules in 21st century marketing that is growing exponentially, and the “4 P’s” of marketing should be expanded to D(Digital Media)+ M (Mobile Marketing)+ S (Social Media) DMS of Online Marketing. A lot of companies are resisting these changes… I work for a local media company and I am trying to pioneer these transitions inside currently, hopefully I do not fall on my sword.

    I am going to be writing an ebook due to be released this spring, speaking about how intrapreneurs like me will be the leaders of tomorrow’s companies.

  17. Lee,
    Very interesting topic. It is a fact that we are in the middle of a marketing revolution which will result in the world community moving from the brick and mortar work place over to the cyber work place. Right now, most of the predictions of economic doom and gloom are coming from thoe who are reluctant to make the transition.

    As was stated in an earlier post here, “In time, we all will all be forced to make the change overto cyber or face certain failure.

    • I completely agree, great insights!

      I feel this with clients everyday, and for the most part education of digital ROI and segmented demos are a big help that discussion.

      The tricky part is as technology and uses for new applications continue to change/improve/become more or less effective, we as marketers have to continually be validating.

      I think for small and large clients (and budgets)alike the marketing mix we see in 2009 will be very different from traditional media we’ve seen up until this point…imagine what we will be thinking about in 2010!

  18. I wonder if the entrepreneurs among you experience this frustration with cyber business. My firm is in the midst of an extremely frustrating process of upgrading our online processes, primarily opt in and shopping cart.

    At first glance there seems to be a lot of great information. But, then you start to notice that all that advice is coming from people with affiliate links. They’re not giving advice; they’re giving sales pitches.

    Immediately, the information is compromised. And that single dynamic is one of the failures in cyber business.

    Our work focuses largely on the psychology of credibility. It is our opinion that cyber marketers need to start injecting themselves with more honesty and objectivity. We’ve all recently seen what happens when honesty and objectivity are overlooked. Can you say “Bernie Madoff?”

    — Michael Lovas

  19. I completely agree with the shifting of marketing budgets. We are up against the Gen Y consumer and we have to get creative. A great piggy back to this is SMB’s 26% Plan to Increase Ad Spending in 2009

  20. Berte Schachter says:

    If you have access to WARC, Mark Renshaw of Leo Burnett wrote a good and pragmatic piece about budgeting for digital media. see:
    WARC: March 2008, How to Set Digital Media Budgets
    Mark Renshaw, Leo Burnett/ARC Worldwide. In his summary, he says:

    “If you don’t have a digital marketing budget, we generally recommend that you take your current marketing budget and divvy it up. Start
    by looking at your audience and understanding what they do and more importantly why they do it. Also look at when and why they
    consume particular media/content.
    Second, understand what has been working for you in all media and the current changes that are affecting what you have done in the past.
    Third, I would suggest that you look at competitive activity and spend. Can you establish a marketing mix allocation that not only taps into
    which media will deliver the results you need today, but one where you can use channels where you do not have to spend simply to
    counter the competition? Are there options to establish a clear advantage via a unique approach?
    Fourth, and last, be aggressive and innovative. Take bold steps and don’t just define digital marketing as the internet. Understand where
    digital creates new opportunities across all types of media that are being re-invented, made more “human”, addressable and interactive.
    This is where the future of digital marketing is.”

    Apologies for a bit of commercial, The ARF’s 1/27 event on listening to the consumer, (through the use of social networks, etc) will help demonstrate how powerful digital media can be to marketers. see: http://www.thearf.org/assets/forum-09

  21. Vishal Agrahari says:

    I give more importance to online media than offline media because only online media where you can turn visitors to your customer on the spot. This is not possible in offline media where people read/watch your product and then think or next hour or next day may purchase your product. Conversion ratio of online Ads better than Offline Ads. And its cost effective also.

  22. Clearly, the move should be toward digital media. The simple fact that content can be dynamically created for a any given buyer as opposed to shot-gunning a message is reason enough. However, a lot of companies are still stuck in their traditional marketing rut, and they don’t know it. They’re trying to squeeze a square traditional marketing peg into a rounded digital marketplace. They learn one tool and embrace it without fully comprehending its potential. If we need to spend resources on anything, it’s educating both seller and buyer, and explaining the digital communications has far surpassed banners and email blasts.

  23. Short answer: yes!
    Long answer: digital marketing is the way to go when you have a product that appeals to the audience that is positioned online. It’s like all marketing answers, you can’t put all your eggs in one basket unless you are extremely sure.

  24. In a word: YES. Smart targeting can pay dividends when it comes to digital marketing.

    You can also start to combine hybrid marketing in cost-effective ways. For example, targeted PR can generate stories both offline and online, but also improve SEO rankings – making it a cost-effective marketing tool. Especially if you use a pay-per-placement service (like Publicity Guaranteed for example), then you get the best of all worlds: offline and online publicity and improved Google rankings.

    Doing things like that is smart marketing, and a way to phase offline into online marketing.

  25. I’m confused. If online publicity is so important, then why are the responses from my columns declining? Before the proliferation of industry portals, nearly all of my business came from responses to my articles and columns. Now, while the quality of content is still excellent (so I’m told), the numbers are significantly lower.

    My take on this is that in the “old days” the people who submitted articles were better writers, and the over all quality was higher. Now, there is a plethora of badly written sales pitches pretending to be actual content. The result is that fewer people are reading, and the articles with real content are lost in the throng.

  26. I have worked in digital and interactive marketing for many years now. Seems that finally potential and existing clients are seriously paying more interest in digital marketing, in contrast against offline marketing. And all the signs and talks show that digital marketing will grow significantly in an economic downturn like the one we are living in right now.

    It is very understandable for such a change of attitude. The simple fact is a business needs sales. Whatever marketing you run, the end results should be increase (or at least sustain) of sales. The results are ever more urgent these days, measurable and tangible results.

    However, it is still amazing to see how much companies used to spend (almost without thinking) in offline marketing compared to digital marketing. Maybe it is just a human nature that when you live in good time, you tend to live extravagantly. And when bad time hits you, you get your feet back down to earth. It is time to change.

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