Marketing Budget Benchmarks are important as growth in marketing budgets has stalled after continued increases over recent years, according to a recent CMO Marketing Survey from Gartner. Marketing leaders must justify past budget commitments and demonstrate the returns they deliver to ensure the future fiscal health of marketing.
Marketing Budget Benchmarks – Key Takeaways
- Marketing Budgets Start to Recede, Dropping From Their Peak by 6%
- 50% of CMOs Lack Financial Planning Muscle
- CMOs Are Playing It Safe, Focusing Budgets on Existing Customers and Outspending Customer Acquisition by a Ratio of 2:1
- CMO’s Spend the MNost on Marketing Analytics (9.2%)
- CMOs Back Digital Advertising – 2/3’s Plan to Increase Investment
- CMOs Reduce Martech Spending by 15%
- CMOs Increase Agency Spend While Reducing Labor
- CMOs Allocate 10% of the Marketing Budget to Innovation
Marketing Budget Benchmarks – CMOs Face a Year WIthout Budget Growth
After three consecutive years of increases, marketing budget growth stalled in 2017-2018.
- Based on the Gartner CMO Survey, budgets slipped from a peak of just over 12% of company revenue in 2016 to just over 11% in 2017.
- Marketers are now tasked with delivering on prior year marketing investments and producing returns to support the organization’s growth needs.
There is also suspicion that CMOs are either being too nearsighted to be strategic or too visionary to operationally deliver against marketing’s objectives. CMOs need to focus on metrics and KPIs that impact the business, and, have a prepared plan for budget cuts that includes proactively building a cost optimization strategy that addresses all areas of marketing spend.
Marketing Budget Benchmarks – 50% of CMOs Lack Financial Planning Muscle
47% of CMOs still depend on basic budgeting methods that roll last year’s or last month’s budget into the next financial period. Another flaw that some organization’s make is to automatically apply a fixed percentage increase or decrease to last year’s budget.
Hopefully it is laziness or naiveness that drives this type of budgeting. That does not make it right but it may explain a flawed process. For instance, budgeting processes that are primarily based on historical data rely on the assumption that the logic that drove the original budget decisions are still fundamentally sound and real. Unfortunately, in a dynamic and complex marketplace this is often not the case.
Marketing Budget Benchmarks – CMOs Focusing on Expansion of Existing Customer Base
Most CMOs surveyed are allocating more marketing spend on customer retention over customer acquisition by a ratio of 2:1, as they feel it is less risky. Customer retention and expansion is important and should be aligned with business goals of building long-term, profitable relationships with the right customers. The best in class B2B marketers will base their retention and expansion efforts from segmentation efforts based on customer value–using lifetime value, profitability and average order value to drive decisions. However, a solid long-term strategy for any organization must balance growth from existing customers with new customer acquisition as that dictates market share, market growth and long-term success.
Marketing Budget Benchmarks – Marketing Analytics Budget is 9.2%
CMOs allocate 9.2% of their total marketing expense budget on marketing analytics. Other popular areas are the website, digital commerce and digital advertising. CMO’s believe that analytics is central to delivering an optimal customer experience, identifying, understanding and growing customers, and measuring and optimizing marketing performance.
Marketing needs to align it’s go to market strategy, execution and resources with the company’s desired business outcomes. MarTech spending year over year was 27% of the overall budget in 2016-2017 but is down 15% from last year. Reasons for the decrease in spending are concerns about marketing’s to effectively acquire, operationalize and manage MarTech. However, MarTech spending accounts for 22% of the marketing budget, according to the 2017-2018 Gartner CMO Spend Survey.
Marketing Budget Benchmarks – Over 65% of CMOs Lean Into Digital Advertising
67% of CMOs plan to increase their spending in digital advertising in 2018. The digital advertising increase is happening despite the likelihood that $6.5B will be diverted from the advertising ecosystem due to fraud in 2017. As CMOs spend more on digital advertising, their is concern that these investments prove wasteful. CMOs must focus on analytics to predict and demonstrate performance and the impact on financial outcomes to the business.
Marketing Budget Benchmarks – CMOs Struggle to Balance Agency Spend & Labor
Labor costs and services together constitute more than 50% of the total marketing budget:
- 25% of the marketing budget was spent on services (up from 22% last year)
- 27% of the marketing budget was spent on labor (down from 28% last year)
- There has been a trend toward insourcing to acquire strategically important capabilities such as analytics and digital commerce in-house
CMOs report that the most important roles that are central to achieving their strategy, such as marketing analytics and digital commerce, are the hardest to acquire, onboard and retain. The inability to attract these roles means that agencies and third parties will be sought to fill these roles and capability gaps and that means the cost will increase significantly. And, the CMO is not building a core competency where they should be developing intellectual property.
Marketing Budget Benchmarks – Marketing Innovation Stays Protected
Despite budgetary pressures for marketing, innovation remains a top priority for CMOs as it becomes a differentiator as competitors buy and implement the same or similar technologies and acquire similar skill-sets. Almost 25% of CMOs now have a line item in their marketing budget titles “Innovation”. And, about 10% of the overall marketing budget is included in the Innovation budget line item. However, the devil is in the details. It’s one thing to have a line item and dollars set aside for innovation and quite another to acquire, implement and gain business benefit (revenue, profitability, customer satisfaction, etc.) from innovation spend. Failure to prove the value of an innovation budget will lead to its quick demise.
Marketing Budget Benchmarks – CMO Budget Guidance
- Gartner’s CMO Spend Survey makes is clear that for CMOs and marketing leaders, it’s time for the rubber to hit the road
- CMOs need to show marketing’s financial contribution to business outcomes
- CMOs and need to demonstrate that marketing can deal with financial constraints and still deliver
- As budget growth stalls for CMO’s, marketers are on the hook to demonstrate ROI by working smarter and doing things differently to elevate their game CMOs need to show accountability and transparency for business performance
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