Marketing Budgets Continue To Get Slashed, Even As Companies Look To CMOs For Growth
While it might feel like parts of business are getting back to normal, the money CMOs have at their disposal is still not where it was a year ago: According to Gartner’s annual CMO Spend survey of nearly 400 marketing leaders, budgets have fallen from 11% of company revenue in 2020 to just 6.4% in 2021.
Ewan McIntyre, the Gartner analyst who co-authored the report, says it’s been a bit of a “slow burn” but also a sum of incremental cuts that have happened over the past year. However, that doesn’t take away from the fact that CMOs have been left with smaller budgets. One challenge he says CMOs have is that companies are optimistic for growth, and a big part of that growth comes from the capabilities that marketing provides.
“The old logic has kicked in which is that marketing gets its budget cut first and gets it restored last,” he says.
McIntyre warns that an easy cut for CFOs isn’t necessarily in the best interest of long-term growth: Companies “cut quickly and repent at leisure because the brand awareness challenges you have which ultimately drive preference and loyalty that can unfold over a longer period of time.” That means CMOs need to work harder at fighting to get their budgets back because it might not be “quite as simple as they think it will be.”
That’s partly because CEOs see priorities like digital commerce and customer experience as ripe for growth, but those often fall under C-suite leaders other than marketing heads. That means CMOs need to gain back budget as well as political power within their organizations.
Gartner’s findings contrast with other recent research that finds ad spend is back on the rise. According to WARC’s recently released global advertising trends report, global ad spend is on track to increase 12.6% in 2021 to $665 billion with the second quarter turning out to be the strongest in more than a decade. (Of course, ad spend and marketing spend aren’t entirely synonymous, but it leads to more questions around how the recovery will really shake out by 2022.) Meanwhile, GroupM in June predicted that global advertising will grow by 19% this year. Around that same time, Magna released its own mid-year forecast expecting growth of 14% to an all-time high of $657 billion.
Gartner’s report also illustrates the continued trend of bringing marketing internally, with 29% of work that was previously done by external agencies having moved in-house in the past year. But this, McIntyre says, may pose a risk of “fast-tracking group think,” since large agencies often bring a range of outside perspectives—and the potential for unintended long-term consequences that impact more than short-term spend.
Another area of note is how CMOs are thinking about their spending on innovation. While allocation to innovation programs makes up 21%, McIntyre argues that it is not necessarily true innovation spending, but rather about the perception of innovation. For example, when Gartner drilled into the data, it found that a majority of respondents said innovation investments focused on “planning, processes and technology,” while “data, content and new channels” were the least likely to receive funding from marketing. The problem: Some of the lowest priorities are the most expensive and resource-hungry, yet the least funded.
“One of the interesting things is innovation is seen as a path towards growth, but it can only be that if we are really truly funding actual innovation as well,” McIntyre says. “Going back to that big number of 21%, it’s both a statement of positive intent, but also a big alarming if that fails to deliver against the innovation mandate that CMOs feel they’ve got.”
A survey conducted earlier this year by The CMO Council and Televerde found that marketers reported being responsible for 44% of a company’s overall revenue while just half (53%) felt confident they’d meet their goals. However, 95% of CMOs said a lack of resources led to measured revenue opportunities while top challenges include organizational silos, the inability to measure full value of marketing, scarcity of needed skills, misunderstanding a new buyer’s journey and a lack of clarity when it comes to who has ownership of outcomes.
The CMO Council’s report also illustrated the ongoing c-suite tug-of-war: 57% of marketers think their CEO is only moderately satisfied with the marketing team’s performance. The CMO Council found that Tom Kaneshige, CMO Council’s Chief Content Officer and the author of the trade group’s report, told Forbes back in May that marketers used to be only responsible for 10% of revenue five years which has led to “a lack of resources, lack of respect and a lack of value around marketing.”
A self-described fan of author Ernest Hemingway, Kaneshige explained the shift using with a famous quote from the novel, “The Sun Also Rises,” where one character asks another how he went bankrupt, to which the other character replies “Gradually, then suddenly.”
“That’s kind of what we’re seeing here,” Kaneshige said. “A lot of these trends were gradually happening, and then the pandemic accelerated it and now it’s suddenly…And when the customer journey is inverted, most of the sales action happens at the top of the funnel and marketers aren’t prepared for it.”