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Ideas for Leaders #741

Existing Customers and Home Markets Drive Growth

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Key Concept

The biannual Duke Fuqua CMO survey highlights growth strategies that are inward-focused, as well as incorporating the strengthening of marketing capabilities, a significant increase in strategic channel partnerships, continued growth in social media spending, and the continuing emergence of AI.

Idea Summary

Growth is a top imperative for marketers, according to the latest CMO biannual survey conducted by Duke’s Fuqua School of Business in collaboration with Deloitte LLP and the American Marketing Association. Nearly 40% of the 323 CMO respondents to the survey put growth as their number one imperative, and another 30% of respondents put it at number two or three.

In responding to the challenges of maintaining growth, companies are focusing growth budgets inward rather than outward. Specifically, the results of the study show that companies are spending a majority of their growth budgets (55%) on building existing markets and offerings, with spending on product/service development next (21.8% of their growth budgets). Spending on new market development (13.5%) and diversification (9.6%) lag behind.

When the sample is restricted to B2C companies alone, the proportion is even greater, with 70.8% of the growth budgets of B2C companies spent on existing market penetration.

Further accenting their focus inward, firms in most industries spend the bulk of their budgets (87%) on domestic markets, continuing a steady rise that has been uninterrupted since 2012. Some industries do spend more internationally, notably mining and construction, consumer packaged goods, and transportation companies. When U.S. companies look beyond their domestic borders, Western Europe and China represent the biggest international markets for sales. 
In addition to the emphasis on existing market and products and services, and on domestic markets over international markets, survey director and Fuqua School of Business professor Christine Moorman identified a number of growth strategies that emerged from the survey:

  • Companies are increasingly investing in building marketing capabilities. Asked about the growth or decrease in spending on the different types of marketing knowledge during the previous 12 months, the CMOs reported a 10.4% increase of spending on developing new marketing knowledge and capabilities, compared to a 8.7% increase on marketing consulting, a 7.7% increase on marketing research and a 3.4% increase on marketing training. 
  • Strategic partnerships play an important role in growing markets, with 74% of respondents reporting going to market through channel partners, a significant increase from 55% two years before. The education, transportation and customer services industries are the greatest users of channel partners. Strategic partnerships allow companies to avoid the costs of building their own technology infrastructures, and defray the costs of providing full sets of products and services, financing market entrance strategies and developing brand recognition. 
  • Another significant increase has occurred in spending on the brand (doubling in five years from 4.3% in 2014 to 9.4% in 2019). This increase — the most in any spending category – reflects the challenge of attracting and retaining increasingly fickle and demanding customers.
  • Companies are spending 5% on training and development, which is the highest level in five years. The importance of staying current with digital skills, and the challenge of hiring the best and the brightest help explain this upward trend.
  • The role of social media in marketing strategy continues to grow. Close to 90% of companies use social media to build brand awareness. Companies also use social media for the introduction of new products and services (64.7%) and customer acquisition (60.1%).
  • Marketing analytics has become a major tool in marketing decision-making: 43.5% of CMOs use analytics when making key decisions, a six-year high.
  • More marketers are using artificial intelligence technologies as a source of marketing analytics for decision-making, but also as a highly effective way to segment and target customers. The use of AI is expected to expand exponentially in the years ahead — although some of the ethical dilemmas already encountered will have to be addressed.

Business Application

Optimism about the economic future dropped in this survey, which may explain the focus by a majority of companies on existing markets, existing products and services and domestic markets. Strengthening marketing capabilities is also key, especially if there is an economic downturn. At the same time, social media-based marketing continues to grow, notably to build the brand, and CMOs see a high potential for AI. In short, CMOs on the one hand focus on the more familiar domestic markets and existing customers and products, while at the same time continuing to explore upward-trending avenues for growth such as social media, AI and channel strategic partnerships.

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Authors

Institutions

Source

Idea conceived

  • February 2019

Idea posted

  • June 2019

DOI number

10.13007/741

Subject

Real Time Analytics