Gartner: 2021 sees lowest proportion of allocated marketing spend

While it isn’t surprising that the pandemic led to marketing dollars being cut in 2020, it seems that the trend isn’t about to be bucked anytime soon.

According to Gartner’s CMO Spend Survey, the proportion of company revenue allocated to marketing fell from an average of 11.0% in 2020 to just 6.4% in 2021 - the lowest proportion allocated to marketing in the history of Gartner’s CMO Spend Survey. Cuts impacted marketing budgets across all industries tracked in the survey, with no industry holding a budget of more than 9% of revenue in 2021.

CMOs in categories that were hit hard by the pandemic, such as travel and hospitality, faced significant belt-tightening. This is compared with budgets as a proportion of company revenue, which were down from over 10% to just 5.4% in 2020. Meanwhile, CMOs from consumer products companies reported the strongest 2021 marketing budgets at 8.3% of revenue. Still, that was a decrease from the prior year, showing that no industry was immune.

In the “CMO Strategic Priorities Survey 2020-2021: Ambitions Threatened by Capacity, Capital and Capability”, Gartner reported that 56% of CMOs expected budget growth of more than 5% in 2021, even if COVID-19 had negatively impacted their business’s performance. However, the return to prepandemic spend levels proved elusive for many marketers and results reflect the downward pressure on marketing spend.

For many, the decline in marketing spend is a steady erosion of marketing’s funds.

Enterprises have proved to be slow in replenishing marketing’s depleted coffers. One reason is that the impact of near-term marketing budget cuts on brand awareness and consideration is often not immediately appreciated by marketing’s stakeholders in the enterprise, said the study.  To counter the downward trend, CMOs need to demonstrate the illusion how the present cuts will lead to a significant risk to tomorrow, as brands lose customer relevance, share of voice and the ability to reach customers with targeted and timely messages.

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The volatility associated with a rapid digitisation of commercial activity, and renewed commitments to customer centricity also caused organisations to shift budget for such activity outside the control of a CMO. For example, CEOs state the top focus points for their chief digital officers in 2021 include customer experience and eCommerce. As these capabilities move to be enterprise digital business initiatives, a CMO’s accountability and budget authority may give way to mere supporting roles.

Therefore, CMOs must not only focus on how to reclaim the wholly cut resources needed to achieve their objectives, but also continuously justify their ownership of both budget and delivery of critical business priorities.

How are CMOs spending

Facing a reduction in resources, CMOs have reprioritised the spending commitments across their channels and programs. Investments in pure-play digital channels, whether owned, paid or earned, dominate CMO’s investment priorities and account for 72.2% of the total marketing budget.

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Looking at the budgets that have benefited from increased investment year over year, social marketing, SEO and digital advertising topped the list of channel winners reported by CMOs.

Offline advertising, mobile marketing and events were the most likely to have faced a budget cut when compared with 2020s spending.

When asked “What’s driving channel reallocations in 2021?” CMOs top responses were:

  1. To better meet the pace of change brought on advances in digital technology (47%)
  2. To improve brand awareness (40%)
  3. To gather data-driven insights from digital channels (39%)

Channels that have traditionally been seen as drivers of awareness, are now vying for budget alongside those that have been considered as performance marketing channels, such as search and social advertising.

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With social distancing rules transforming buying journeys for B2B and B2C customers throughout 2020 and well into 2021 for some markets, CMOs have also prioritised investment in the programs and capabilities that fuel digital commerce success. When we asked CMOs how they divide up their budgets by programs and operational areas, digital commerce investments were the most popular, accounting for 12.3% of the total budget.

(Photo courtesy: 123rf)