KEY POINTS:
New Zealand technology firms invest heavily in marketing themselves, but the money is often not targeted in the right direction, according to a new study.
The Market Measures Survey, by PricewaterhouseCoopers and IT marketing consultancy Concentrate, surveyed 100 businesses in the software, electronics, IT services and telecommunications sectors.
It found that overall, businesses in the technology sector spent an average of 39 per cent of their turnover on sales and marketing.
Concentrate managing director Owen Scott said this indicated local technology businesses were "an aggressive bunch of marketers" by international standards. US research had found technology companies there spent 20 per cent of turnover on sales and marketing while in "maintenance mode", with the figure only rising to 40 or 50 per cent when businesses were in acquisition mode or focused on high growth.
The survey found New Zealand technology businesses spend an average of 8 per cent of their total budgets (excluding salaries and wages) on marketing. US surveys had found the equivalent spending there was between 3 per cent and 3.6 per cent.
The report concluded that while the local technology sector was spending up large on sales and marketing, it lacked the targeted strategies needed to make the most of that investment.
"In our opinion Kiwi tech investment in marketing is too passive. US benchmarks are much more focused on proactive, lead-generating activity," Scott said. "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."
The report acknowledged that New Zealand's isolation from the rest of the world and its "relatively limited reputation as a technology-producing country" meant exporting businesses in the sector needed to market themselves aggressively.
Despite the demands, a high proportion of local technology sector businesses were involved in exporting, according to the report. It found 72 per cent of companies in the sector sold goods and services overseas. By comparison, a broader PricewaterhouseCoopers survey of businesses across all sectors of the economy found 34 per cent were involved in exporting.
PricewaterhouseCoopers partner Owen Gibson said local technology companies rated themselves well on their ability to sell their products.
"However the results [of the survey] 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," he said.
Gibson said the sector's challenge was to develop more businesses that were internationally competitive.
"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," he said.
"In today's economic climate this focus is more important than ever."
The report found local technology businesses were generally growing strongly and were optimistic about their future growth potential. Those who took part in the survey reported average growth during 2007 of 58 per cent and had predicted similar rates of growth for this year.
"The nature of the New Zealand tech sector means there is a significant concentration of start-ups with very high growth rates," the report said. "But even the larger enterprises in the survey had recorded good results and were bullish about future prospects."
According to the Government's HiGrowth Project there are more than 8000 technology-related businesses in New Zealand, although fewer than 1 per cent record annual sales of over $15 million.
Marketing technology
* New Zealand technology companies have an average of between one and two salespeople and less than one person in a marketing role.
* They spend an average of 39 per cent of turnover on sales and marketing (including staff costs).
* 72 per cent of technology companies export, predominantly to Australia, the US and the UK.
* Average growth during 2007 was 58 per cent, although many companies were in the low-revenue, start-up phase of the business cycle.
On the web
The Market Measures Survey report is online at: www.concentrate.co.nz
