Why Spending for Social Media Marketing Falls Short of Expectations
Although companies spend more on social media, brands spend less than marketing managers had predicted, perplexing many advocates of social media marketing.
Social media marketing spending has increased 234% over the last seven years, rising from 3.5% of marketing budgets in 2009 to 11.7% in 2016, a new CMO Survey reveals.
However, those figures fall short of what marketing managers predicted five years ago, when they predicted they’d be allotting 17.5% of their budgets to social media by now. Social media spending has consistently fallen below expectations.
Why the gap?
Christine Moorman, a professor at the Fuqua School of Business, Duke University, and CMO Survey director, postulates reasons for the disconnect.
- In a bandwagon effect, companies read the hype and feel pressure to spend what they observe (or think) other companies are spending. When results fail to meet hyped-up expectations, the bandwagon fades.
- An explosion in social media content has saturated consumers, decreasing the effectiveness of social media marketing which then lowers brands’ enthusiasm.
- Marketing budgets fund a smaller share of social media. As social media gains acceptability as a strategic tool, funding may be coming other areas of the company.
Another reason may be more convincing. Many social media efforts may be ineffective. The social media programs don’t meet acceptable ROI targets, causing managers to reduce budgets. Almost half of firms (44.1%) say they haven’t been able to show the impact of their social media spending, and only 4.6% say social media contributes very highly to company performance.
“Success in the social world of marketing requires a deep connection to the customer and the ability to drive a transformation of the company to embrace a whole new type of customer engagement,” Moorman says. “Many companies lack the knowledge and skills to make this happen.”
A Question of Measurement
Other research reveals that marketing executives would spend more on digital marketing if they found better ways to measure its return on investment. Almost 75% of over 400 marketing executives polled by the marketing and advertising agency Millward Brown Digital say they would spend more on social media if better ROI metrics existed, up from 50% in 2014.
“Marketers are looking for the shortest path to ROI possible. They want to attribute a media purchase, whether it’s on a TV network or a digital property, to a sale,” Stephen DiMarco, Millward Brown Digital’s president, told The Wall Street Journal. “Variables from quality of creative to the choice of the media property whether it was online or traditional to the retail experience to promotions and coupons to even inventory available– it’s all going to impact ROI.”
Big data represents an unrealized opportunity for improving digital marketing effectiveness. Over 40% of the survey participants cited big data as the largest opportunity for marketers, yet marketing executives appear less comfortable with big data. Surprisingly, just 14% said they’re confident with how their company applies big data, compared with 39% the previous year.
“A top pain point in our organization is having insufficient knowledge and training on how to use the available data to continually refine marketing programs,” one unnamed survey participant stated.
Bottom Line: Budgets for social media marketing have not increased as much as marketing leaders expected. Research points to lack of measurement as the most likely reason for the discrepancy, although other factors may be involved. Corporate managers are reluctant to increase funding for social media if they don’t see its connection to ROI.
Originally published at www.cyberalert.com on August 31, 2016.