8 Prominent Trends from Gartner’s CMO Spend Survey
As the year comes to an end, it’s the time for those surveys, trends and similar posts to crowd up the blogosphere and I thought let me do my bit too. Gartner recently released their CMO Spend Survey 2017-18 ; like any other Gartner report, it is extensive and takes quite some time to read but I did the hard work for you and here are the curated key trends and insights from the report for your easy consumption.
THE KEY TRENDS
- Growth in Marketing spend has stalled after three consecutive years of growth. In 2016, marketing spend was at its peak at 12.1% of company revenue, which came down to 11.3% in 2017
- Martech Spend has fallen by 15%. CMO’s are reconsidering last year’s high spending commitment and how to manage technology effectively.
- Two-Third of CMO’s plan to increase their spend on Digital Marketing, while traditional marketing faces budget cuts.
- Over 50% of the overall marketing budget is spent on Services and Labor and CMOs are constantly struggling to balance between in-house and agency resources.
Marketing Budget Starts to Recede
Unlike the last three years, where marketing budget has consistently increased YoY, this year marketing budget decreased to 11.3% from last year’s 12.1% of total company revenue in 2016; though there has been exceptions to this, as in the case of extra-large businesses.Gartner attributes this cut mostly to changes in macro-environmental conditions, both politicalas well as environmental, that has impacted business results overaall and consequnetially their appetite for marketing spend.
Half of CMO’s Lack Financial Muscle
47% of the CMO’s use basic budgeting techniques likel rolling out this year’s budget onto next year or incrementally applying a percentage increase or decrease on last year’s budget. Marketing budgets should be grounded based on returns they will deliver to the business. It is observed CMO’s with P&L responsibilities get nearly 50% higher marketing budgets.
RETENTION OVER ACQUISITION
CMO’s are focussing budget on retaining existing customer and outspending customer acquisition by a ratio of 2-1.
We all know that it requires a lot more effort to acquire a new customer than to retain an existing one. And that is clearly reflected in the marketing budget allocation. CMOs’ budgets have become heavily skewed toward retention, with retention budgets dwarfing acquisition budgets by a ratio of 2-to-1.
CMO’s of course need to justify this spend against the profitability generated from existing customers. Also, not all customers are equally profitable, hence the spend has to be monitored and managed, not to allocate budgets for the wrong customers. It is also important to allocate a reasonable budget towards new customer acquisition in respect to long term growth and revenue pipeline.
MONEY ON ANALYTICS
Marketing analytics gets the greatest share of marketing budget at 9.2%
CMO’s are willing to open up their purse strings for analytics. Analytics moved up from it’s last year’s position 4, behind website, digital commerce and digital advertising to be the No.1 area of spending. This is definitely in alignment with the greater focus on making the most of their marketing budget and focussing the right customers.
DIGITAL GETS MORE MONEY
No surprises here really, two-thirds of the CMO’s surveyed are planning to increase investment in digital advertising, while traditional media investments see a cut-down. Besides the changing media consumption pattern among customers, measurability is one of the key factor that is adding to the CMO’s intent to invest more in digital advertising.
MARTECH SPEND DECREASES BY 15%
Martech still commands 22% of a CMO’s budget, however, it is a significant drop from 27% that was marked for Martech last year. In general, a reduction in overall marketing budget has contributed to this reduction but to top it up, acquisition and management of technology has been a challenge for most CMO’s. Continuous pressure from CFO’s and CIO’s has been mounting on CMO’s and they will need to improve their Martech capabilities in order to reclaim their martech budget.
INHOUSE VS AGENCY : MAINTAINING THE BALANCE
Labor cost and services constitute more than half ( 53%) the marketing budget, with 25% spent on services and 27% on labor. Of late there has been a trend towards building inhouse teams, particularly for strategically important roles and agencies and third parties are playing more of a supportive role in the marketing organization.
MARKETING INNOVATION REMAINS A SPENDING PRIORITY
Though there is an overall drop in marketing budget, marketing innovation secures a 10% of the total marketing budget. On top of that 23% of the CMO’s surveyed, now have a fixed annual innovation budget. The continued commitment to innovation at the time of an overall budget cut, clearly shows the commitment to balance the value marketing can deliver in future against the performance it delivers today.