Ninety-One Percent Of Brands Do Not Budget For Innovation — Why Marketing Leaders Must Change Culture to Avoid Disruption

I published a report based on a Q2 2013 survey that benchmarked marketing innovation culture and indicated that most marketers are still not investing enough to accelerate their innovation efforts. Only 11% indicated that they are currently setting aside budget specifically for marketing innovation programs. Budget is both an indicator of intent and lifeblood for these programs to succeed. Today, Advertising Age published an article based on this report — "Most Brands Aren't Budgeting For Innovation." Below is the article Forrester submitted to Advertising Age.  

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Only 11% of marketers set aside a specific budget for marketing innovation efforts, and only 9% make marketing innovation a part of every marketer’s budget, according to a recent study of 45 marketing leaders. What’s more is that 95% of these marketers agreed, mostly agreed, or partially agreed that they are achieving positive ROI from their innovation programs. Why the difference? Mastering marketing innovation is getting harder and harder due to the ever-changing customer landscape caused by digital disruption, perpetually connected customers, and shifting customer expectations.

In every industry, digital competitors are taking advantage of new platforms and tools to undercut competitors, get closer to customers, and disrupt the traditional way of doing business. In fact, the same survey found that the majority of surveyed firms — 46% of which generate over $1 billion in revenue per year — are still in the early stages of innovation maturity. To keep up, Forrester maintains that the only way to compete is to evolve — and innovate. But creating an innovation-driven culture is challenging. First, firms must understand the four marketing innovation cultures in order to determine both their current and aspirational state:

  • Risk-averse. This culture typically exhibits “command and control” personalities like those that are in highly regulated industries or have monopolistic power within market segments. Traditionally, they only innovate when forced.
  • Pragmatist. This culture tends to be conservative and consensus driven, which makes it slow to react to changes. Although these organizations’ current marketing programs still drive business, they are increasingly at risk from smaller, more nimble competitors. In fact, Forrester has found that more than 60% of brands fall into this category.
  • Experimenter. Typically, firms with an experimenter culture are highly focused on innovation to drive differentiation around customer experience but lack a long-term strategy.
  • Customer-obsessed. These firms are defined by their obsession with the lifestyle, needs, and wants of their customer and build a culture that is both rare and inherently innovative. In fact, Forrester has found that only 3% of brands fall into this category. Take iconic brands like Coca-Cola, Nestle, Chick-Fil-A, and 7-Eleven, for example. They have established a foundation through strategy, organizational development, and budgeting that reflects their commitment and industry-leading programs.

After a brand has identified its approach to innovation, what’s next? Leading innovators don't target where their customers are today but where they will be in the future. With customer technology adoption moving faster than ever before, marketers must accelerate their brand and company through a disrupted, fragmented ecosystem. Get started by:

  • Making the business case for innovation and securing C-level support. The key to long-term success of a marketing innovation program is C-level monitoring. In fact, Forrester has found that only 20% of marketers receive support from executive leaders when it comes to these types of programs. In order to make a stronger business case for innovation, marketers must consider: 1) a plan to develop organizational leadership; 2) specific marketing innovation budget allowances by either total or percent of marketing spend; and 3) expected ROI. One way to maximize productivity is to take advantage of in-house or agency partner innovation labs to brainstorm and ideate “what’s next” opportunities. Once strong contenders are identified, conduct pilot market tests, measure results, and scale those that gain traction.  Use the results of these pilot programs to demonstrate the need for ongoing funding and support. 
  • Leveraging customer insights to take an innovation-anywhere approach. It’s no secret that understanding customer behavior is critical to success. So why do only 40% of brands source innovation ideas from their customers and technology and agency partners? Just as firms would conduct physical store walkthroughs, marketing teams should regularly conduct digital touchpoint walkthroughs. By taking the same digital journey as a customer, brands will learn invaluable information about customer experiences, expectations, and challenges. In addition, leverage employees who interact with traditional and digital touchpoints on a daily basis. Both sources are a treasure trove of information waiting to be exploited.
  • Establishing a dedicated marketing innovation budget and holding the team accountable. A dedicated marketing budget is critical to success. Take the Coca-Cola model of 70-20-10, where 70% of the marketing budget is for “now,” 20% for “new,” and 10% for “what’s next” marketing programs. It’s also imperative to hold teams accountable by determining the success or failure of each program. The only way that the organization will learn what works and what doesn’t is to synthesize the insights, end failing programs fast, and quickly scale the successes.

To learn more about this research, visit the full report here