Annual growth in marketing spending exceeded 10 percent for the second time in the last 10 years and is anticipated to increase to over 13 percent through 2022, according to the 28th edition of the CMO Survey.
The report, which shares insights on brand trust, climate change, privacy and more, also found that marketing budgets as a percent of overall budgets rose to 11.7 percent, resetting to pre-pandemic levels while marketing budgets as a percent of revenues increased to 10.3 percent. Among the survey’s key findings include:
- Digital marketing spending accounts for just over 57 percent of marketing budgets and is expected to grow by over 16 percent over the course of the next year.
- Investments in digital marketing have increased across the board while investments in data analytics increased by roughly 40 percent over the last year and are now the most common marketing investment.
- Survey respondents report the integration of customer data across all touchpoints and combining digital and offline data as the most prominent digital marketing challenges they face.
- Just one-third of marketers surveyed reported that their company has in place specific goals related to climate change. Less than half of those marketers believe their companies are willing to make short-term financial sacrifices for climate change.
- Companies are less likely than they were in prior years to take specific actions to reduce the negative impact of marketing-related activities on the environment.
- Forty percent of companies are not taking any climate-related actions, either because they don’t feel customers or partners will reward such action or because some customers aren’t willing to pay more for climate-friendly offerings.
- Over the last decade, there has been no increase in the concern over marketing’s impact on the climate.
- Marketers expect a 75 percent increase in first-party usage over the next two years, as compared to second-party data (46 percent) and third-party data (39 percent).
- There has been no meaningful increase in privacy concerns since 2019 as marketers label them as “moderately” concerning. This may be explained by the fact that roughly 66 percent of marketers feel that customers will stick with current brands instead of switching for the purpose of increasing privacy
- More than 90 percent don’t believe consumers read or understand privacy disclosures. Nevertheless, marketers continue to take actions to ramp up brand trust in the face of ongoing privacy issues.
Just under 40 percent of marketers are less optimistic about the US economy in Q2 2022 compared to the previous quarter—up from 37 percent in February 2021, the survey found. This decline is consistent with the rise of the COVID-19 Omicron variant, inflation and ongoing supply chain issues.
The report found that optimism reached almost 67 percent, which is lower than that reported in August 2021, but considerably higher than the 51 percent figure reported in June 2020.
As a portion of overall budgets, marketing budgets have returned to pre-pandemic levels at 11.8 percent. Annual growth in marketing spending surpassed 10 percent for the second time in a decade and, according to the report, is predicted to reach 13.6 percent over the next year. Digital marketing spending is also expected to increase, growing by 16.2 percent during the same time frame.
Over the course of 2022, marketing spend is predicted to increase across all categories, including brand building (11.8 percent), customer relationship management (9.5 percent), new product introductions (8.8 percent), customer experience spending (8.6 percent) and new service introductions (5.3 percent).
Marketers report customer acquisition budgets being 14.7 percent larger than customer retention budgets as companies spend roughly 7 percent more on research and development than they do on marketing.
Marketing performance surged for all tracked metrics compared to the previous 12 months. In February 2021, approximately one year into the pandemic, marketers reported a 0.3 percent revenue gain over the previous year. In February 2022, revenue gains recovered and reached about 14 percent on average.
Similarly, marketers reported a 10.7 percent increase in profits in February 2022—almost 8 percentage points higher than that reported one year prior. These growth rates point to the contention that despite its pace, business is recovering from the negative financial effects of the pandemic.
From a societal perspective, companies’ metrics haven’t changed much over the last 10 years. In February 2011, for example, marketers reported a 3.2 rating for their companies’ marketing having had a positive benefit to society. This most recent CMO Survey reported a 3.3 rating.
Customers And Channels
Ranked as the top priority by 31.3 percent of marketers, superior product quality will be their customers’ top priority in the next year. Beyond that, excellent service (22 percent) and trusting relationships (14.3 percent) will also be prioritized. These findings are similar to those found in August 2021; though compared to February 2020, there’s now a greater emphasis on product quality—especially within the business-to-consumer sector where product quality increased as the top priority from 7.4 percent to over 39 percent.
A similar trend emerges when studying companies in the consumer packaged goods sector. Here, product quality wasn’t prioritized by any of the survey respondents in February 2020. That month, over 45 percent of those companies identified superior innovation as their customers’ top priority. Now, that figure is 10.7 percent. This trend aligns with consumer behavior of flocking to tried-and-true brand name products during their stress-induced pandemic shopping sprees—a phenomenon that caused companies to divert funding away from innovation and toward their core product lines.
Considering this new emphasis on product quality, most marketers believe their customers trust their brand above the industry average. Business-to-consumer and business-to-business service companies believe this more strongly and rated themselves as 8.2 and 8.1 out of 10, respectively.
Marketers have reported a notable reduction in the use of channel partners over the last decade—they’ve moved toward disintermediation to market alone. The companies that continue to use channel partners are consumer packaged goods companies (80 percent) and companies with over $10 billion in sales (76 percent).
Marketers Report Strong Brand Trust From Customers
Over 90 percent of companies believe that customers trust their brand more than the industry average. Of those that believe they are significantly less trusted are pharma/biotech companies – unsurprising considering the COVID-19 pandemic and issues around vaccines.
Managing Digital Marketing Returns
Investment in digital marketing activities has increased since February 2021 as it continues to be a priority for marketers.
Data analytics investments are now the highest priority, increasing from 56.5 percent in February 2021 to 77.5 percent one year later. Pointing to a stronger push toward customer-level data management and advanced customer analytics, some of the other top movers include marketing technology systems or platforms (14 percent), managing privacy issues (20.5 percent) and improving company apps (32.6 percent).
Despite these successful figures, the survey notes there’s room for improvement. Despite the fact that 60 percent of marketers continuously test and iterate their digital marketing, less than 40 percent feel they have an adequate system to track customer data and have consolidated/integrated customer data across all touchpoints. For this reason, they’re investing heavily in data analytics and martech systems.
Today, roughly one-third of all digital marketing activities are performed by external agencies. Business-to-consumer companies are most likely to use external agencies, which happens to be over 45 percent of the time.
Data Analytics Investments Skyrocket To Top Priority
Although digital marketing investments have increased across the board, data-related activities experienced the highest growth. For example, in February 2021, 56.5 percent of companies invested in data analytics. Today, that figure is 77.5 percent and includes larger companies, primarily. As data collection and purchasing becomes more complex, companies are increasing investments in efforts to analyze, store, manage and automate their data.
Current State Of Digital Marketing Practices
- 67.2 percent of companies continuously test and iterate their digital marketing
- 64.8 percent of marketing leaders have a good understanding of the technology roadmap and capabilities they can use to do great marketing
- 62.1 of companies share customer information from sales, marketing, customer service and product teams across the company
- 59 percent of companies are able to connect their digital marketing data with other intelligence they have about customers
- 58.7 of companies have been able to link digital marketing returns to business outcomes such as incremental revenues or profits
- 56.6 percent of marketing leaders are more collaborative with the CIO/CTO (or the equivalent technology leaders)
- 54.1 of marketing teams have the skills and training to best use their company’s marketing systems powered by technology systems/tools
Contributions From Digital Marketing
As expectations increase and attribution analyses evolve, perceived contributions from digital marketing have declined, according to the data. Pure-play internet companies experience the highest returns on digital marketing (5.7 out of 7) as consumer-facing companies report above-average returns (B2C product, 5.4; B2C services, 5.2). Real estate (2.8), energy (3.6) and pharma/biotech (3.9) report the weakest industry-level returns, potentially due to the planned purchase nature of their products and services.
Marketers are still concerned about third-party data. As much as 17.7 percent of marketing leaders report that they expect their companies’ use of third-party data to decrease over the next two years. The survey asked these marketers to rate their worries concerning the intersection between privacy and third-party data and found an average of a moderate 3.8 out of 7. Third-party data concerns rise dramatically as they relate to Apple offering users the option to choose which apps can access their data and Google phasing out tracking cookies on the Chrome web browser by 2023. For these reasons, marketers are being forced to learn how to extract more value from first-party data.
Just over half of marketing leaders report that protecting customer privacy falls under their job description. And over 58 percent of marketers report that their companies are taking steps to create stronger privacy strategies. Sixty-two percent of marketers believe customers will remain loyal and stay with brands as opposed to switching to others that offer more privacy protection.
Forty-five percent of marketers believe that sharing privacy notices with customers improves customers’ perception of their brand despite the fact that 95 percent of those marketers believe that customers don’t read them carefully and that over 90 percent don’t think customers comprehend the message.
Marketers continue taking actions to ease consumers’ concerns such as promising not to sell customer information (63.1 percent), informed consent of customer data usage (58.1 percent) and investing in technology that reduces the risk of data breaches (52.2 percent).
Marketers anticipate a larger increase in first-party data usage over the next two years compared to their usage of second-party data and third-party data. In August 2018, just 11.4 percent of marketers predicted a decrease in their use of third-party data.
Today, that figure is 17.7 percent. In the wake of the changes spearheaded by Apple and Google, marketers will have to find different avenues to gather relevant user data on their own or to partner for it. As technologies evolve and allow companies to gather and interpret first-party data, CMO Survey expects this trend to continue.