Gartner: Marketing budgets stalled in 2017

Gartner study reveals two-thirds of CMOs expect increases in budgets despite spending cuts over recent years

Growth in marketing budgets stalled after continued increases over recent years, according to a survey by Gartner.

The 2017-2018 CMO Spend Survey, conducted among 353 marketing executives in North America and the UK from companies with more than US$250 million in annual revenue, found marketing budgets hit a plateau in 2017 after three years of growth, with budgets falling from 12.1 per cent of company revenue in 2016 to 11.3 per cent in 2017.

Chief marketing officers have modest expectations in 2018, the survey found, with only 15 per cent saying they expect a significant increase in budget and 52 per cent expecting a slight increase. One-third expect their budgets will be cut or frozen.

"While the descent is not yet steep, it still poses difficult questions for chief marketing officers," Gartner research director, Ewan McIntyre, said. "Previous budget increases have come with weighty expectations, some of which have yet to be met.

“The time has come for marketing to show its financial management credentials, proving it can deal with financial constraints, assume accountability for business performance, build budgets based on future returns rather than past assumptions, and grow the business while making hard choices."

There was also evidence that CMOs may have become distracted, either by a heavy focus on operational and tactical measures of performance, or by large, cross-functional initiatives such CX programs that have yet to provide hard economic benefits.

"The risk is that CMOs are either being too nearsighted to be strategic or too visionary to deliver against marketing's objectives," said McIntyre . "The result is a lack of focus on the metrics that matter to CMOs and the business, how marketing activities deliver return on investment and profitability to the organisation."

Not all organisations have felt the impact to the same extent. The report revealed extra-large businesses have been shielded from cuts thus far, and cuts have varied across industries, with retail and manufacturing hit hardest. While Gartner predicted these cuts, they will come as a surprise to many CMOs.

Meanwhile only 14 per cent of respondents surveyed in the previous year's CMO Spend Survey anticipated cuts in 2017, meaning many CMOs will be ill-prepared for change. At the same time, the survey found that two-thirds of CMOs plan to increase investment in digital advertising, while traditional media faces budget losses.

More than half of CMOs expect their investments in event marketing and partner/channel marketing to fall or flatline, with 63 per cent of marketers stating they expect flat growth or cuts in offline advertising investment. And investments are growing across a range of digital channels, including websites, mobile and social media marketing, with 64 per cent planning to boost budgets.

"The shift to digital away from traditional media reflects changing media consumption habits of target audiences," McIntyre said. "However, without capabilities like marketing mix models CMOs risk cutting away at channels based on gut feel, irrespective of the journeys their customers and prospects actually take to buy, own and advocate their product and brand. These journeys likely include a range of digital and traditional touchpoints, which interplay and integrate with each other."

Measurability is a contributing factor to digital media budget growth. The report showed CMOs' focus on analytics reflects the need to demonstrate marketing and advertising performance and effectiveness to the business. The multi-channel journey demands that marketing leaders go further than channel performance metrics and challenges them to employ advanced analytics to answer the elusive total marketing ROI question.

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