Digital spend: the chicken or the egg?
Quantifying industry e-spend
How much of our sales and marketing spend should go to digital? Thats a question we often get. 5%? 10%? More? Less? And of which budget? Sales & Marketing? Marketing? Do we include Medical? Etc. etc.
One thing is certain: It is very difficult to get good data on this in the pharma industry. In a recent survey, Cegedim Dendrite mentioned that less than 0.1% of the S&M spend was devoted to digital in 2009 in Europe; in a recent US survey by the same company, the number was estimated to be close to 10% for some of the leading companies. SDI, another leading market research company, puts the number at 2.5%, vs 2.4% for 2008 (Read full article here)
In our annual emarketing survey in Europe, the number stands at around 5% of the marketing spend (ie, excluding sales). (NOTE: the survey will be available by the end of May for more info, pls contact Marijke De Vuyst).
The single commonality among all these sources is that the numbers are rising fast. But are they rising fast enough to reflect their full potential?
The chicken or the egg?
Lets think this through a bit further. Time and again, pharma feels they are lagging other industries in the adoption of digital, while their customers are flocking to the e-channel in very similar percentages. So, how much are these sectors spending on digital? Can this be a target for pharma?
A recent Econsultancy survey in Europe pointed to 10-20% of the total marketing spend (ie, excluding sales). So, the conclusion sounds simple: pharma should by allocate, say, at least 10% of their marketing spend to digital to start with(ie, at the higher end of the Across Health survey).
In fact, 10% of 30% (the estimated percentage of marketing in the sales & marketing budget) is still only 3%...close to the number that SDI found in the US (but much higher than the Cegedimdendrite estimate for Europe).
And last but not least, allocating 10% to e in your upcoming marketing plan, would also end the eternal chicken or the egg question Should we spend big to see results that move the needle, or should we get results first before we spend big? Today, many digital projects lack critical mass, and, as a result, customer impact will often be limited and future digital projects get deprioritized With 10%, the digital budget will be important enough to move from a project in time to a business-critical process.
Is this not overly aggressive? Well, some smaller companies are creating a totally new customer-experience blueprint already with even higher budget allocations to digital. And in other companies, the 10% rule can be applied as in asset management: 10% as an average, moving to 20% for an aggressive portfolio and 5% or so for a risk-averse one.
Good luck with the budget planning process!