Ideas for Leaders #456

Social Media Grabbing a Major Share of the Marketing Budget

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Key Concept

Companies will be steadily increasing their spending on social media marketing in the next few years, even though most marketing executives cannot measure the financial impact of such spending. The shift in consumer buying patterns to online makes a shift to social media marketing a logical step, despite the current inability to demonstrate ROI. The pressing issue now is for companies to integrate social media activities into their general marketing campaigns. 

Idea Summary

Internet-based sales have been growing steadily — companies report a 25% increase in the past year alone, according to a survey of 351 marketing executives. Not surprisingly, investment in digital marketing has also been increasing — companies expect to increase their spending on digital marketing by nearly 11% in the next year while, in contrast, decreasing their spending on traditional advertising by 3.6%.

While Internet-based sales still account for only 11.3% of total sales (up from 8.9% the previous year), the trend is clear: customers are buying more through the Internet, and companies are responding by paying more attention to digital marketing.

But how does social media marketing fit into the picture? Much of the increase in digital marketing investment described above involves social media. Currently accounting for just 9% of total marketing budgets, companies will be allocating 13% of their marketing budgets specifically to social media in the next year, and 21% of their budgets within the next five years — an increase of 128%. Since companies are not increasing their social media staff — in fact, CMOs report an average of three in-house social media employees, a slight decrease from earlier in the year — the increased spending is on technology and infrastructure.

Asked to quantify the return on this social media investment, however, and CMOs find themselves at a loss. Nearly 85% of the marketers surveyed said they could not show quantitatively the impact of social media on their businesses. However, 40% of companies did have a qualitative sense of the impact, and the result is even higher (50%) for B2C companies.

The survey also revealed that social media marketing strategies are not well integrated into the rest of the companies’ marketing strategies. Asked to rate their companies’ integration of social media on a scale of 1 to 7, with 7 being very integrated, respondents on average gave their company a disappointing 4.  Nearly 25% of respondents gave their companies a 1 or 2.

Another topic of interest is whether companies use the behavioural data that today they can collect from online purchasing. A majority of companies — about 60% — do not use customer behavioural information collected online to target their customers. However, 80% of companies said their use of such data would be increasing in the next few years.

Business Application

With companies increasing their social media marketing spending to more than one-fifth of their marketing budget over the next five years, the lesson for those still waiting for quantitative assessments on social media marketing is clear: the train is leaving the station, and it’s time to hop on in a big way or be left behind.

The challenge for most companies is integration. As noted by survey director Christine Moorman, companies must ensure a high level of consistency between their online and offline efforts. Any inconsistencies, she says, will raise doubts in consumers’ minds about the effectiveness of their offerings. Leadership and organizational structure are the keys to connecting social media strategies to the rest of the company’s marketing strategies.

Marketing leaders must be held accountable for the collaboration and consensus between online and offline marketing teams. Creating the right organizational structure — a structure that enables, for example, close communication throughout the marketing function — is also important.

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Idea conceived

  • September 2014

Idea posted

  • October 2014

DOI number



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