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Concentrate and USA counterparts

Concentrate and USA counterparts

Study shows New Zealand's technology industry marketing is aggressive but misdirected.

2 December 2008. Kiwi technology companies outspend their US counterparts on sales and marketing, but not necessarily on the most effective strategies, according to a new benchmarking study conducted by Concentrate and PricewaterhouseCoopers.

The study, conducted in October 2008, involved an in-depth online survey of 100 New Zealand technology companies from the software, electronics, IT services and telecommunications sectors.

Respondents ranged from small-to-medium enterprises to large exporters (over $250m annual turnover) and from start-ups to companies in business for over 20 years.

"The survey shows that almost 40 percent of the average New Zealand technology company's turnover is spent on sales and marketing," says Owen Scott, Managing Director of Concentrate.

Mr Scott said this contrasted with US benchmarks which range from 20 percent for technology companies in maintenance mode, up to 40-50 percent for focussed on acquisition or hi-growth. "On the whole our technology companies are an aggressive bunch of marketers."

However, there was a question mark over how this investment was spent. "In our opinion Kiwi tech investment in marketing is too passive - US benchmarks are much more focussed on proactive, lead generating activity, " he says. "Our firms need to take a more strategic view of marketing as a tool for lowering the cost of sales by finding and targeting the most profitable market opportunities."

PricewaterhouseCoopers Partner Owen Gibson said respondents rated themselves well on their ability to sell their products. "However the results show they lack targeted marketing strategies, which would allow them to identify new markets here and overseas, and help them grow into larger-scale enterprises"

Mr Gibson said that was the real challenge for the sector - developing more enterprises of internationally competitive scale. "A key to this is ensuring they put effort and resources into planning carefully for the future - doing the work to identify those long strategies for long-term sustainable success.

"In today's economic climate this focus is more important than ever," he says.

Other key statistics:

* The average Kiwi tech company has 1-2 sales people, less than 1 marketing staffer, sells multiple products primarily to export markets - the most common being Australia, USA and UK. They grew 58% last year and predict a similar level of expansion this year.

* In total 72% of the companies sold offshore, an outstanding result when compared to the 34% of companies who said they exported in the broader PricewaterhouseCoopers Clever Companies Insight 2008, which surveyed almost 800 mainly privately owned business across a wide range of New Zealand industries.

* The average marketing spend as a percentage of total budget (excluding staff expenditure) was 8%. A 2007 study by IDC put the US tech average at 3%, a 2006 study by Marketing Sherpa 3.6%.

* Spending 39% of turnover on sales and marketing (including staff) was the average. For software product companies it was 45%, electronics companies 33%, IT services 41%.

A full copy of the report will be available for download from www.concentrate.co.nz on 2 December 2008.

About Concentrate Concentrate Limited is a New Zealand-based technology-marketing consultancy. www.concentrate.co.nz

About PricewaterhouseCoopers PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 154,000 people working in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. "PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

Clever Companies Insight 2008: www.clevercompanies.co.nz

ends

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