Marketing budgets as a percentage of company revenue have dropped from 11 percent in 2020 to 6.4 percent in 2021—the lowest share allocated to marketing in recent history.
That’s according to Gartner’s CMO Spend Survey, conducted from March through May among 400 respondents in the US, Canada, France, Germany and the UK.
During 2020, Gartner found that the majority of chief marketing officers saw cuts well above 15 percent of the total marketing budget. Research from Gartner’s CMO Strategic Priorities Survey, however, shows that 56 percent of CMOs expected budget growth of more than 5 percent in 2021.
That decrease reflects a steady erosion of marketing’s funds amid marketing stakeholders’ lack of understanding on the impact that near-term marketing cuts have on brand awareness and consideration. As the report suggests, CMOs need to demonstrate in their next budgeting cycle that the current facade of savings presents a big risk to brand relevance, share of voice and the ability to engage customers with targeted, timely messages.
Accelerated investments in digital have come at the expense of functions such as marketing. All nine industries Gartner tracked were impacted by marketing budgets, with no industry holding a budget of more than 9 percent of revenue in 2021.
Travel and hospitality saw budgets as a proportion of company revenue down from 10 percent to just 5.4 percent in 2020. CMOs from consumer products companies reported the strongest marketing budgets at 8.3 percent of revenue in 2021.
Investments in pure digital channels — be they owned, paid or earned — dominated CMOs’ investment priorities, accounting for 72.2 percent of the total marketing budget. Social media, digital ads and SEO are among the channels CMOs invested most in.
Almost a quarter of respondents told Gartner that cost reductions are what drove channel reallocations for the following reasons: to better meet the pace of change spurred by advances in digital technology (47 percent), to improve brand awareness (40 percent) and to gather data-driven insights from digital channels (39 percent).
Compared with previous years, marketing channel budget priorities have changed little year-over-year, with marketing technology still dominating at 26.7 percent of the total budget — a slight increase from 2020.
Agencies’ share of the total budget has declined slightly, by 0.7 percent, signaling the increase of efforts being moved in-house. Respondents reported that 29 percent of work previously produced by agencies has moved in-house in the past 12 months. The top three reasons for this, CMOs said, include brand strategy, innovation and technology, and marketing strategy development.
Across marketing programs and operational areas, digital commerce holds the largest share of the pie at 12.3 percent of the total budget, followed by marketing operations (11.9 percent) and brand strategy (11.3 percent). Marketing analytics came in fourth, comprising 11 percent of total budget.