PR is Lead Marketing Discipline for Most Tech Companies
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Holmes Report

PR is Lead Marketing Discipline for Most Tech Companies

High-tech start-up companies are spending more in marketing in 2001 than they did in 2000, and public relations continues to be the lead marketing discipline for most of those companies, according to a new study.

Paul Holmes

High-tech start-up companies are spending more in marketing in 2001 than they did in 2000, and public relations continues to be the lead marketing discipline for most of those companies, according to a new study conducted by Launch Pad, a San Francisco-based marketing consulting firm, and Blanc & Otus, a high-tech PR firm and subsidiary of Hill & Knowlton.
(For PR firms suddenly wondering why their fee revenues are down, the obvious explanation is that there are far fewer start-ups this year than there were in 2000.)
The study produced both good news and bad news for the public relations sector. The good news: public relations has overtaken advertising as the lead marketing discipline (at least in budget terms) at most start-ups, and is ranked number one in terms of effectiveness by marketing executives, and 28 percent felt they had under-spent on PR in 2000. The bad news: PR’s share of the overall marketing budget declined slightly (though obviously not as dramatically as advertising’s) as companies turn to direct marketing and channel marketing, and 13 percent of respondents felt they had over-spent on PR last year.
“Most surveyed marketing executives believe that a young, emerging company can do little that is as cost-effective as well-done PR,” says Greg Spector, CEO of Blanc & Otus. “The need to establish and build long-term relationships with press and analysts requires a significant and continuing investment in this important function.”
At the same time, “The survey’s quantitative results and the editorial remarks that accompanied them reveal that it is possible to over-invest in PR if done at the exclusion of other activities. PR is only one aspect of a well-balanced marketing program.”
In 2001, the average marketing budget increased from $2.2 million to $2.8 million, but the marketing budget allocation as a percentage of sales has declined dramatically, from 155 percent in 2000 to 65 percent this year. As a percentage of total company expenditures they declined by 5 percent, thanks to increases in spending on sales and business development (52 percent) and engineering (45 percent).
At the same time, companies reduced the amount of spending on advertising—once 22 percent of the marketing budget and now 17 percent—and their websites, and to a lesser extent, the amount spent on trade shows and PR. At the same time, they increased the percentage of the marketing budget allocated to direct marketing—up from 7 percent of the budget to 13 percent—collateral materials, and channel marketing.
This left public relations (19 percent) as the biggest item in the marketing budget for most tech start-ups, followed by trade shows and events (18 percent), collateral (14 percent), direct marketing (14 percent), and advertising (12 percent). The direct marketing budget is split between online and offline programs, and Launch Pad says it expects online direct marketing program spending to almost quadruple in 2001, with click-through rates for opt-in e-mail programs running at around 5 percent.
Asked to grade marketing activities for their overall effectiveness on a scale of one to seven, respondents gave public relations the highest marks (5.5), followed by their corporate websites (5), collateral materials (4.6), channel marketing programs (4.5), and direct online programs (4.4). Online advertising was rated the least effective (2.3), followed by print advertising (3.1) and other—presumably television and radio—advertising (3.2).
In line with this finding, 35 percent of respondents said they had over-spent on advertising in 2000, with 27 percent saying they had over-spent on trade shows and events and 14 percent saying they had over-spent on public relations. But twice as many respondents (28 percent) felt they had under-spent on public relations, second only to the 44 percent who said they had under-spent on direct marketing.
Most companies continued to believe that low overall awareness was their biggest marketing challenge, with 59 percent identifying awareness as a major challenge, compared to 34 percent who cited the bleak overall economy, 28 percent who cited lead generation, 25 percent who cited budget constraints, and 19 percent who cited product differentiation.
“We found last year’s survey resonated so strongly that many high-tech companies adjusted their marketing budgets after the report came out,” says Shelley Harrison, founder and CEO of Launch Pad.  “While we do not recommend any marketing department use these findings as their budget template, there are important trends and lessons to be learned from survivors of the recent downturn.”
Successful marketing departments are using programs with quick, measurable returns in terms of sales prospects or revenue, she says. Gone are the expensive long-term brand-building activities. Advertising and event programs have been pared back. Instead, companies have turned to targeted, measurable lead-generation programs.
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