2 min read

Is Marketing Being Absorbed by Technology?

Is Marketing Being Absorbed by Technology?

Recent data indicates a diminishing role of marketing within organizational structures, particularly when compared to functions like engineering, technology, and innovation.

In a previous study, there ewas a decrease in U.S. companies' advertising expenditures from 1% of total spending in 1975 to 0.8% in 2017.

This led researchers to conclude that marketing's significance in the corporate hierarchy appeared to be waning, especially in contrast to the growth of engineering, technology, and innovation functions, with R&D expenditures surging from 1% to 8% during the same period.

However, it's important to note that marketing encompasses more than advertising spending, as many scholars and practitioners rightly pointed out.

Unfortunately, detailed information on marketing expenses, distinct from advertising, is not typically disclosed by companies, making it challenging to assess the evolving importance of marketing over time, based solely on reported expenditures.

CMO Reports on Spending

Analysts turned to another data source: the top leadership of S&P 1500 firms.

When they analyzed the top five highest-compensated officers within these firms from 1999 to 2017, they uncovered a significant decline in Chief Marketing Officers (CMOs) occupying this elite group—a reduction of approximately 35%.

Simultaneously, the number of officers representing information or technology in the top five, highest-paid category surged and now surpasses the number of CMOs.

As executive compensation typically correlates with seniority within an organization, this data strongly indicates that the standing of CMOs in the organizational hierarchy has diminished.

This finding reinforces an earlier assessment that marketing, as a function, is currently less esteemed than it once was.

Is Marketing... Dying?

Several factors may explain these trends.

There are More Tech Than Other Companies

First, the proliferation of tech companies over time has contributed, while the number of companies in other sectors, such as retail and manufacturing, has declined.

Both retail and manufacturing primarily deal with physical products and rely heavily on traditional marketing principles encapsulated in the 4Ps framework (product, price, promotion, and place).

People Have More Sources to Vet Products

Second, marketing itself has transformed. Today, consumers allocate a growing portion of their income to software-based services delivered over the internet.

They also rely more on online sources like bloggers, reviews, and influencers for information about products and services, surpassing the impact of traditional advertisements.

Furthermore, advertisements are instantly targeted to browsers based on customer data, requiring continuous experimentation, dynamic decision-making, and expertise in algorithms, data science, econometrics, and big data.

This shift necessitates a more prominent role for IT within marketing, and individuals with a technology-centric perspective have become increasingly crucial.

Conversely, marketing professionals lacking technology understanding may find it challenging to maintain their positions, suggesting that marketing is potentially merging with IT or being outsourced to entities like the Google Marketing Platform.

Tech is the Foundation of Innovation - i.e., the Leading Story

Third, technology-focused founders may undervalue marketing and allocate fewer resources to this function. Many of today's leading brands, including Google, Microsoft, Amazon, and Facebook, were established primarily through technological innovation, differing from past successful brands like Coca-Cola and Nike, which heavily relied on advertising for brand creation.

Notably, among Forbes magazine's top five most valuable brands—Apple, Microsoft, Google, Facebook, and Amazon—only Microsoft had a CMO listed among the top five highest-paid executives in 2017.

Acquisition Trumping the Build

Another plausible explanation is the growing trend of companies acquiring established brands rather than nurturing them from scratch. This is evident in the escalating pace of mergers and acquisitions.

High-profile deals like Microsoft's acquisition of LinkedIn, Facebook's purchase of WhatsApp, and Google's ownership of YouTube in multibillion-dollar transactions exemplify this shift.

This trend could explain the increasing prominence of Chief Financial Officers (CFOs) within organizational hierarchies. CFOs play a central role in negotiating acquisitions, determining integration strategies, and arranging financing for these deals.

Lots of Changes Change the Trajectory of Marketing's Future

In conclusion, findings indicate a reduced prominence of CMOs within organizational hierarchies, accompanied by a substantial rise in the significance of Chief Technology Officers (CTOs).

These observations hold relevance for boards of directors, CEOs, and various departments, including IT, marketing, and human resources, as they contemplate future staffing, compensation, and promotion strategies.

It may be time to transition from viewing marketing and technology as distinct departments to encouraging closer collaboration.

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