Misguided and shortsighted marketers are to blame for falling budgets, a new survey by Gartner reports. Marketing budget allocation has shrunk to 2015 levels, dropping from 12.1 percent of total revenue in 2016 to 11.3 percent this year, the firm reported in its latest findings.
Why’s The Money Gone?
“While the descent is not yet steep, it still poses difficult questions for chief marketing officers,” said Ewan McIntyre, research director at Gartner. “Previous budget increases have come with weighty expectations, some of which have yet to be met. The time has come for marketing to show its financial management credentials, proving it can deal with financial constraints, assume accountability for business performance, build budgets based on future returns rather than past assumptions and grow the business while making hard choices.”
Chief marketing officers are pessimistic, however, about budget-allocation prospects in the coming year. Only 15 percent expected a significant budget increase in 2018, while 33 percent expected their finances to be either frozen or even cut.
While the report suggests that recent natural disasters in addition to Brexit and global political volatility may be responsible, it quickly points out that this is not the full picture.
“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 programs that have yet to provide hard economic benefits,” the report reads.
McIntyre recommends a middle course to reverse this trend in the coming years, saying, “The risk is that CMOs are either being too nearsighted to be strategic or too visionary to deliver against marketing’s objectives.”
Where’s The Money Going?
Despite, or perhaps even because of stagnating budgets, many CMOs plan to significantly change up their strategies, with 67 percent planning to increase marketing budget allocation for digital advertising at the expense of traditional media. Over half of the surveyed CMOs planned to plateau or reduce spending on event and partner marketing next year, and 63 percent said the same about offline advertising in general.
As marketers find themselves with less leeway to take risks on new technology, martech spending has dropped by 15 percent this year. Additionally, martech’s share of total marketing budget allocation has dropped as well, from 27 percent in 2016 to 22 percent this year.
Following this trend of reducing risk in budget allocation, marketers have shifted resources drastically toward keeping consumers and away from attracting new ones. Spending on customer retention now dwarfs acquisition by a two-to-one ratio, something Gartner warns may be sacrificing long-term health for short-term safety.
Increasing focus on measurability explains much of this shift in spending. As brand safety and fraud concerns grow, marketers are pushing for more quantifiable data to ensure a proper return on investment. Gartner emphasizes the importance of paying attention to metrics, but warns against playing it too safe.
“CMOs need to think and act fast, ensuring they continue to meet the growing business expectations,” the report reads, “or further cuts will be ahead.”