Marketing Budgets Hit an Eight-Year Low
Marketing budgets have shifted downwards, dropping from 11.2 percent of overall company revenue in 2018 to 10.5 percent in 2019, according to a survey of chief marketing officers (CMOs) by Gartner. This is the first time since 2014 that marketing budgets have dropped below 11 percent of revenue.
At the same time, though, CMOs are not troubled by the trend.
“In the face of perplexing external and internal environmental signals, CMOs remain confident about economic and budgetary outlooks, with almost two-thirds (61 percent) of CMOs expecting their budgets to rebound in 2020,” says Ewan McIntyre, a vice president and analyst in Gartner’s marketing practice.
That confidence might not be warranted, though, according to McIntyre. “That same percentage of marketing executives believed their budgets would increase in 2019, indicating their optimism is misplaced. While we’re not yet witnessing a precipitous drop in budgets, this year’s downtick presents a counterintuitive scenario. You could call this confidence in the face of adversity. Or you could call it hubris,” he says.
Among the biggest consequences of shrinking marketing budgets is a drop-off in marketing technology investments, which saw a 3 percent slide year over year and made up just 26 percent of total marketing budgets in 2019.
Amid economic uncertainty, technology is proving to be a more volatile investment area, the research suggests.
The types of technologies garnering attention are also changing. Some more established technologies, such as personalization engines and account-based marketing, are fading, Gartner reports in its 2019 “Hype Cycle for Digital Marketing and Advertising” report.
At the same time, though, spending on paid media, particularly on digital channels, has increased. Gartner’s research found that marketing investment in paid media increased from 23 percent in 2018 to 26 percent this year; digital channels dominated, taking up 16 percent of total marketing budgets.
Confidence in digital ads remains strong, with 78 percent of CMOs expecting to increase investment in 2020. “As organic reach on social platforms plummets to zero, and confidence in influencer marketing is challenged, paid media presents more pros than cons for CMOs,” McIntyre states.
However, digital ads are not the only areas experiencing continued support. Across paid, owned, and earned channels, CMOs are still investing in a range of channels. Offline advertising and TV spending remain strong as well, taking up 7 percent of total marketing budgets.
Not surprisingly, analytics remain the most strategically important area for investment, and CMOs expect it to dominate their marketing strategies for at least the next 18 months. This year, analytics made up 16 percent of total budgets allocated to marketing programs and operational expenses.
In another budget shift, Gartner’s 2019 Marketing Organizational Survey finds that 63 percent of marketing leaders have moved some of their projects from outside agencies to in-house teams.
Still, while output volumes might have shifted, it has not eroded the significant value CMOs place in external service providers. In fact, spending on marketing agencies still accounts for nearly a quarter (22 percent) of total marketing budgets.
“While in-housing may be à la mode, agencies still offer an unparalleled breadth of scope, economies of scale, and an ability to offer much-needed external strategic input,” McIntyre explains.
Forecasts are further muted, though, because marketing maturity levels are still lacking at many companies, according to Gartner’s data, which McIntyre says could present a significant risk to ongoing investment prospects and future funding commitments.