Marketing budgets in the era of austerity — to cut or not to cut?
Growth in marketing budgets has stalled after continued increases over recent years, according to a survey by Gartner. The survey found that 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, representing a return to 2015 levels.
Chief marketing officers (CMOs) have modest expectations in 2018; only 15 per cent say they expect a significant increase in budget; 52 per cent expect a slight increase. Onethird expect their budgets will be cut or frozen.
Gartner’s 2017-2018 CMO Spend Survey was conducted from June through August 2017 among 353 marketing executives in North America and the UK at companies with more than $250 million in annual revenue.
“While the descent is not yet steep, it still poses difficult questions for chief marketing
The shift to digital away from traditional media reflects changing media consumption habits Ewan McIntyre, Research director at Gartner
officers,” said Ewan McIntyre, research director at Gartner. “Previous budget increases have come with weighty expectations, some of which have yet to be met.”
2017 has been a year of significant macro-environmental upheaval, in terms of both global politics and natural disasters — North Korea, Brexit and hurricanes Harvey, Irma and Maria, for example. Marketing is not immune to the business impact that stems from such incidents.
There is 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 as customer experience programmes 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. 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. Only 14 per cent of respondents surveyed in last year’s CMO Spend Survey anticipated cuts in 2017, meaning many CMOs will be illprepared for change. CMOs need to think and act fast, ensuring they continue to meet the growing business expectations or further cuts will be ahead.
The survey found that 67 per cent 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. At the same time, investments are growing across a range of digital channels, including websites (61 per cent of CMOs expect to increase investment) and mobile (59 per cent expect to increase spending). CMOs also show a strong and continued commitment to social 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,” said McIntyre. “However, without capabilities like marketing mix modelling, CMOs risk cutting away at channels based on gut feel.”
— business@khaleejtimes.com