The digital transformation of marketing has led to unprecedented growth in scope and purchasing power. New channels, new technologies and new capabilities require new levels of investment. But good times can't last forever, and as budgets continue to erode, the pandemic ushers in a new, more difficult era. This puts chief marketing officers (CMOs) under pressure to reduce spending on previously sacred parts of their portfolios, such as marketing technology.
Gartner's annual survey of hundreds of CMOs outlines how marketing spending has changed in recent history, providing insights into how business leaders can achieve results and create opportunities for growth over time.
No one gets fired for spending more on digital and technology.
When did you first go digital ? I got my first job 20 years ago with the word "digital" in the title, which presumably makes me a digital marketing veteran. At that point, I spent almost as much time building the business case as I did activating the campaign. It's easy to forget, but the transition from offline to digital in the mid-2000s was a given. Digital marketing leaders are always hungry for more – more budget, more technology, more data, more people, more attention from the management team.
Of course, that was the start of extra time. Digitalization has hit marketing hard and has created a huge opportunity to communicate, connect and do business with consumers and customers. It also poses a challenge for CMOs, who struggle to balance their mass-demanding digital marketing leaders with non-digital leaders. And the first is a compelling argument: we have always touted the virtues of digital as a cost-effective, scalable and scalable choice . In contrast, anything offline looks cluttered, dated and, well, analog.
No one gets fired for spending (even more) on digital and technology.
My period was long. Digital is a hungry beast with seemingly endless alluring tools, technologies, talent and channels. I became a marketing analyst in early 2016 – at a time when martech and digital channels were a large part of the overall marketing budget. At the time, our annual survey on CMO strategy and spending showed that the average company's marketing budget was 12.1 percent of company revenue. In 2016, more than a quarter of all marketing budgets were allocated to technology, and each of the top three channels by spend was digital.
In the year While 2016 may have represented a high-water mark in terms of overall marketing budgets, it was certainly no different—in fact, technology spending made up nearly a third (29.2%) of marketing budgets in 2018. Total marketing budget. And the marketing budget averaged 11.2 percent of the company's revenue between 2016 and 2020.
Less, but always more
In the year When we surveyed CMOs before the pandemic crash in early 2020, CMOs did not consider the full impact of Covid-19: damage to marketing budgets and disruption of the customer journey. But the pandemic has provided another push for digital and technology. Brands that previously lagged behind their peers now had no choice but to turn to digital channels to engage and transact with captive audiences. Brands that have already invested heavily in digital have had no choice but to accelerate their investment even further.
So less was more. More e-commerce, more digital channels and more technology in 2020 When we surveyed CMOs, they said they were more likely to protect their investments in technology than in resource mix components like paid media or agencies because they believed technology would do it. Be an important tool in helping them grow. Epidemics - when we reach the "new normal".
Long recovery after Covid
Like a carrot at the end of a stick, the "new normal" has gotten hopelessly out of hand in recent years. The World Health Organization may have declared the Covid-19 global health emergency over, but we are still far from normal. From the recent collapse of major banks to the volatility of various social media platforms, these issues weigh on everyone's mind at Group C, regardless of their vulnerability. These seemingly endless obstacles translate into many anchors for business growth:
- High interest rates affect the investment that can be found in new investments. In the current macroeconomic environment, investors prioritize income and cash flow over future growth. High interest rates also dampen demand in the economy and slow growth.
- A stubbornly tight talent market with high employee turnover rates, increased competition for key strategic roles, declining employee confidence in management and enthusiasm for hybrid and remote work.
- Digital Transformation Delays Gartner's 2023 Board Survey Report found that 81% of boards have not met or achieved their corporate digital transformation goals. Additionally, a 2022 study from Gartner found that 67% of CFOs believe that digital spending has not met business expectations over the past three years.
While it's convenient to chart the company's recent history in pre- and post-pandemic times, a turning point has also occurred. Businesses have transitioned from a period of focused investment in supporting tools and capabilities that drive digital growth to an era where returns on those investments are beginning.
Investments in technology and digital marketing are common , if not cool and different. According to Gartner , these investments will move from innovative systems – transformative, disruptive and largely unproven – to systems of record – a key strategic force where efficiency is achieved and the enterprise maintains predictability, reliability and stability.
We (don't) need a big boat
That brings us to 2023. Data from Gartner's annual CMO Strategy and Spending Survey, released in late May, suggests other eras are coming to an end. First (and most obvious), the more than 400 North American and European CMOs we surveyed show that marketing budgets have not returned to their pre-Covid highs. Indeed, the survey reported a decline in revenue in 2022, from an average of 9.5 percent of the company's revenue in 2022 to 9.1 percent in 2023.
Perhaps more worrying than the high budget trends is the significant squeeze in the purchasing power of the market. Price increases (of talent and digital media) and price decreases (marketing technology adoption rates) have created a lifelong transaction cost crisis similar to what consumers in many markets have experienced over the past 18 months. In other words, every marketing dollar buys less. So, in effect, we have moved from one more era to one less era.
The impact of economics and sentiment was heard loud and clear in responses to this year's survey. More than 70% of respondents said their organization does not have enough budget or resources to execute a marketing strategy by 2023. Seventy-five percent of respondents said their company demands too much for too little, and 86% said they feel under pressure. Meaningful changes in how marketing works to achieve sustainable results.
Perhaps the most surprising findings from this year's research concern companies that are impatient for technology investments. Three-quarters of respondents said they were pressured by companies to reduce their investment in martech, something that would have been unthinkable just a few years ago. Also: the seemingly inexorable growth of digital media has stalled. If we look at the percentage of media spend allocated to digital and offline channels, it will drop one percentage point to 55% by 2023. 1975 classic movie Jaws : We don't need a big boat; We need more efficient.
Adaptation to the later era
From classic 70s movies , Francis Ford Coppola's "This doesn't mean GMOs will feel the kind of profit Coppola is talking about, but it highlights a bigger challenge: Sometimes more can lead to less. Or vice versa, sometimes you get more. With less.
But giving more with less is one of those dreaded clich̩s Рeasy to say and extremely hard to do. This is difficult because most business leaders are very close to the state. In the thousands of conversations I've had with CMOs and marketing executives over the years, a common problem is, "How do I make a business case for increasing my marketing budget?" Another logical part? "How do I decide what I can and can't cut?"
The answers to these fundamental questions cannot be found in shiny new technology; Rather, it is a systematic account of eating green vegetables. As a leader, you must have a solid plan that defines the scope of the deal and be clear about how the purpose of the deal meets the company's goals.
In addition, your plan should be based on short-term activities that generate glowing leads and sales today and investments that will drive diversification and growth tomorrow. It requires a unique story to define the marketing value proposition for the business – how marketing drives ROI and ROI . And it requires the realization that the task of constructing this value story is not about economic models or behavioral analysis. They are not for the end, but for the end. Marketing is about reaching a consensus with stakeholders on how to deliver value.
It's also about accepting and navigating the abundance of uncertainty and using the key strategic tools of scenario planning and sensitivity analysis to understand the existing issues critical to success so your team can develop strategic options that respond appropriately.
Going back to the first principles of sound strategic management, marketers create a plan that frees them from external factors, allowing them to focus on the right areas that can least support them in achieving a goal.
To put it a little differently, at Gartner we explain how CMOs can break free from more authoritarianism by focusing on three key leadership qualities:
- calm. The choice is important. CMOs must make clear decisions about what will - and will not - be supported throughout the life of the strategy. Failed initiatives should be equally thought through and considered, and it should be clear why.
- Courageous leaders must have the courage to ask the tough questions of their team. It identifies false assumptions, systemic sensitivities and harmful cultural norms. For example, CMOs should avoid the price bias that says, "Just because we spent $100,000 on a program doesn't mean we should spend another $100,000." Likewise, CMOs have to contend with historical value assumptions: just because an investment made sense three years ago doesn't mean the business case will hold up a few years from now. All major investments must be justified on the basis of measurable contributions to future goals, not the past.
- Successful communication is almost always a collaborative effort. ss pupil joul heol gigic or fayword. CMOs must collaborate with CFOs, CSOs, CIOs, etc. to joint marketing programs with a clearly defined and shared understanding of how they will achieve business objectives. Likewise, they need to understand where marketing intersects with other functions in the value creation process. Avoid vague parameters and three-letter abbreviations. Translate brand conversations into sales volume to simplify marketing and increase engagement.
Wait, but what about AI?
Maybe "Is AI really changing everything?" You may ask. Perhaps the transformative power of AI will usher in a new era of digital investment.
But the reality is complicated for many reasons.
First, AI isn't particularly new to marketing—it's been there for years, lurking in your technology stack (and your partner's and company's technology stacks). Second, demand and excitement at the prospect of manufactured AI is increasing at a time when the rate of use of the technology has decreased. Gartner's 2016 So for every dollar you spend on Martech, you get half of your investment back. Since marketing technology consistently accounts for more than a quarter of all marketing budgets, this rate of return is more than just a technology risk – it's a financial risk.
This level of financial risk does not prevent the CMO from looking at new technology solutions. But they should think carefully before making new promises.
Gigijia
A general rule of thumb in corporate finance is that marketing budgets drop like a rock at the first sign of trouble and rise like feathers when the environment is stable. We are in a stable situation in mid-2023 - the projected GDP growth in Western markets is disappointing, inflation is becoming very stubborn and these swellings are still occurring. It's hard to get a big boost in a short-term marketing budget.
But the picture is a bit muddled. Mask diversity and budgets vary widely across industries and geographies. If you're a consumer goods CMO, chances are your 2023 budget will be much healthier than your financial services competitors. And if you live in Germany, you may have a less healthy budget than your colleagues in the UK. By 2023, however, budgets had returned to pre-pandemic levels in all industries and markets surveyed.
What 2024? More information We may be seeing a different era as new technologies, experiences and channels open up bold new marketing opportunities. And maybe we can take some important lessons from the Komer era and make marketing more efficient and effective, even with increased funding. Can be.
