Lower Marketing Spend Is Not a Problem - Efficiency Is Rising

The latest results of the "CMO Spend Survey" conducted by the analytical firm Gartner revealed an interesting correlation - what is it? Although marketing budgets have fallen below the 11% of revenue threshold for the first time in 5 years, at the same time digital spending is growing and sentiment is optimistic. Marketers remain hopeful - nearly two-thirds (61%) expect their budgets to increase in 2020.

The analytical firm Gartner has just released its annual "CMO Spend Survey" report, which invited 350 marketing industry specialists from Europe and the United States to participate. The key takeaways? First, spending on marketing activities is falling from 11.2% to 10.5% of company revenues. The second takeaway is the growing share of spending directed at digital channels. Put simply - digital is beginning to consume an increasingly larger portion of marketing budgets. Today it stands at 16%.

"For years, spending on traditional marketing grew, but it wasn't necessarily tied to effectiveness. It was only the digital transformation of marketing and technological progress that made it possible to measure the effectiveness of these activities. Many companies now limit themselves to operating exclusively online, and digital promotion is becoming the key way for a brand to communicate with its audiences. All because of the possibilities it offers - precise measurement of engagement, the ability to personalize, or optimization of the advertising budget." - comments Piotr Prajsnar, CEO of Cloud Technologies, a Warsaw-based company specializing in Big Data marketing.

CMOs Are Saving but Investing in Digital

The online form of promotion enjoys great popularity and trust. The proof? As many as eight out of ten (78%) CMOs expect increased investment in this area in 2020.
Is technology getting cheaper?

Spending on Martech and Paid Media

As further analysis of the report showed, not only did overall spending on how much companies allocate to promotion decrease, but so did the amounts that businesses invest in marketing technology - that is, advanced IT solutions supporting organizations in implementing their marketing strategies. Compared with the previous year, the percentage share fell by 3 percentage points to 26% of total marketing spending, which nonetheless still represents a significant value.

"It's worth mentioning one more important statistic. Nearly one in four heads of marketing departments reveals that, in their opinion, it is the lack of an appropriate strategy, implementation, and use of martech tools that is the cause of failure in acquiring new customers or building loyalty among existing ones." - notes Piotr Prajsnar of Cloud Technologies.

At the same time, Gartner specialists noted an increase in spending on paid media, that is, traditional advertising for whose exposure a brand must pay. These activities still absorb a significant portion of the marketing budget, and compared with the previous year, a year-over-year increase of 3 percentage points was observed in this area, to 26% of overall spending.

Analytics and Big Data as a Way to Handle Recession

In their report, Gartner analysts point out that - "The vast majority of employees across all industry sectors believe their organizations are likely to make cuts over the next 12 months, and 28% say their companies are already actively cutting costs." This likely has an impact on the reduction of marketing-related spending in organizations. In this case, fear of recession comes into play, prompting a belt-tightening policy.

The remedy for smaller budgets may turn out to be improved ROI (return on investment), resulting from higher efficiency of the campaigns being carried out. Such an effect can be achieved by using advanced marketing analytics and big data. This approach appears to be confirmed by the surveyed marketers, who were asked to indicate the key issues they want to accomplish within their budgets. At the top of the list were the following activities: market research and competitive intelligence and marketing analytics (all three - 32%), digital commerce (31%); and marketing operations (30%).
Market analysis and analytics have appeared on the CMO priority list for many years, and not without reason - according to Gartner, 76% of marketing leaders say they use data and analytics to make key decisions. So where should we look for the reason why, for the first time in 5 years, the industry recorded a weaker result? Is the economic factor the only reason for the weaker result in 2019?

"In the face of increased spending on IT or research and development, many CEOs expect tangible returns on investment in the form of better efficiency from the promotional activities undertaken. That is why data analytics is becoming a key aspect of building marketing strategies, which requires both the appropriate competencies of team members and access to analytical tools such as DMP." - explains Marcin Filipowicz, an expert at the Audience Network agency specializing in data consulting and the execution of digital campaigns.

How CMOs spend their budgets is an important indicator of where they place their greatest hopes and which issues will be treated as priorities in the near future. Marketing's continued financial commitment to digital channels as well as to data and analytics clearly shows that marketers intend to continue a development and action strategy based on digitalization and the use of the most modern solutions from the world of IT - artificial intelligence, machine learning, and the building of predictive models.

Summary

Gartner's "CMO Spend Survey" report shows that marketing budgets fell for the first time in 5 years to 10.5% of revenue, but digital spending is growing and now stands at 16%. Despite cuts, 61% of marketers expect budgets to increase in 2020. Analytics and Big Data are gaining key importance, helping to improve ROI and prepare for a possible recession. Among CMO priorities, market research, marketing analytics, and digital commerce dominate. Interestingly, nearly one in four marketing heads points to the lack of a martech strategy as the cause of failures in acquiring customers.