4 Key Findings in the Annual Gartner CMO Spend Survey 2019-2020

October 3, 2019
Contributor: Laura Starita 

Marketing budgets are down, but CMOs are optimistic about driving strategic goals.

The CMO mandate to drive growth shows no sign of letting up, with good reason. No one role has the combination of customer insight, tech savvy and creativity needed to innovate on the customer experience.

This rise in status does not always bring an equal increase in resources, however. The current picture from the annual Gartner CMO Spend Survey 2019-2020, which surveyed more than 340 marketing decision makers from North America and the U.K., shows a slight decline in top-line marketing spend to 10.5% of revenue, a level not seen since 2014.

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The writing has been on the wall for some time, says Ewan McIntyre, VP Analyst, Gartner. “Throughout the past two Gartner CMO Spend Surveys, budgets in North America and the U.K. have been hovering at just over 11% of company revenue. In fact, when you look back across the previous five CMO Spend Surveys, the mean average budget is anchored at 11%.”

“The four big spending buckets show areas of growth and areas of contraction”

Yet marketers express optimism that they will continue to have what they need to realise their strategic goals. Whether or not that optimism survives the prolonged U.S.-China and Brexit trade negotiations, only 18% of survey respondents believe they will have to deal with budget cuts next year

In the meantime, marketers continue to invest in the critical capabilities while shifting some spending away from agencies and martech. The details of the 2019 CMO Spend Survey offer insight into how and where marketers are placing their strategic bets. 

The four big spending buckets show areas of growth and areas of contraction

Changes took place in between 2018 and 2019 in all four of the major spending categories of agency spending, martech, paid media and labour. 
Marketing Budget Allocations Across Major Resources from the Gartner annual CMO Spend Survey 2019-2020

Agency spending is down and labour is up

Agency spending is the only one of the big four to show multiple years of decreased spending. Marketers say they want to rely less on agencies, and followed through with less spending. A commensurate growth in labour spend is likewise logical, as marketing departments grow key capabilities.

The spending differences were very small, suggesting change is slow. For all the talk amongst marketers of in-housing core capabilities, agencies continue to deliver value. They provide skills and capabilities that marketing organisations have not yet been able to develop.

What agencies are asked to do has changed, however. Agency spending is shifting away from commoditised activities like media planning and buying, and toward strategic activities such as strategy development and digital transformation programme execution. This is where agencies want to play, because they can charge more for value-added activities and the contracts are longer-term. But it is also where marketing organisations want to take control, creating tensions between current spending and organisational development.

Martech spending is down — for now

Martech spending as a percentage of the budget is down by around 10% since 2018, from 29% of the marketing budget to 26%. That seems significant given the 30% increase in martech budget between 2017 and 2018, but it is not. Marketers show no signs of disillusionment with technology. On the contrary, marketing leaders continue to view martech as a tool for driving customer engagement and account growth. 

Instead, the drop in martech spending is typical of the technology purchase cycle. When an organisation makes a major purchase or upgrade, it means a boost in spending, followed by a drop the following year as the firm integrates the technology and optimises in-house processes to use it.

The current decline may, in fact, be overdue. In 2018, marketers reported they use only 61% of the functionality available in their martech portfolio. Organisations lack the resources and skills to integrate and adopt the tools. A slight investment hiccup may simply reflect current efforts amongst marketers to better use what they have.

 

Paid media spending is on the rise as digital ad spend dominates

Paid media is up around 10% from the previous year to 25% of the total marketing budget, with digital media as the clear spending driver. Along with search advertising, digital ad spend comprises around 16% of the total marketing budget.

Social media platforms dominate digital ad spend, followed by display advertising and video. Amazon made a dramatic entrance and rose fast to capture more than 17% of the 2019 digital ad budget.
Digital Media Spend Breakdown from the Gartner annual CMO Spend Survey 2019-2020

Marketing leaders show no signs of slowing digital ad spending. Seventy-eight per cent say they are likely to increase digital advertising next year. Should the current swirl of economic uncertainty coalesce into a true downturn, however, only half as many would commit to increase digital ad spend. Digital will fare better than offline ad spending, however. Offline advertising, currently 7% of the budget, is expected to increase for only 16% of marketers in the event of a downturn.

Data & analytics tops the priority list of investments for the future

Marketing leaders highlight a number of critical priorities in their budgets. The following capabilities rose to the top: Market research and competitive insights (named as top-three priority by 32% of respondents); marketing analytics (32%); digital commerce (31%); and marketing operations (30%).

Insights and analytics have appeared on the CMO priority list for years, with good reason — 76% of marketing leaders say they use data and analytics to drive key decisions. Yet marketing organisations also struggle to evolve their data capabilities. Continued investment in technology and data talent is not optional for those with ambitions for their data.

One of the data challenges many marketers must overcome is a bias for volume metrics over value metrics. Volume metrics track performance or efficiency. Value metrics, in contrast, assess the quality of an interaction or its impact on the customer relationship and on profitability. Only together do they give marketers necessary insight into customer engagement and loyalty. Analytics investments should take that into account and move toward a more balanced mix of performance data.

The rise of marketing operations in this year’s survey is also noteworthy. A range of strategic capabilities are increasingly collected under the control of a discrete operations function. No longer is ops limited to finance and budgeting. Increasingly, it is overseeing digital project management and talent development. This ascent up the marketer’s priority list signals a strategic focus on improving the business management at marketing’s core.

How CMOs spend their budgets sends a clear signal about where they are placing future bets. Marketing’s continued financial commitment to digital channels and to data and analytics makes clear its intention to maintain its reign at the centre of business transformation toward technology-enabled, digitally capable models. 

Learn more about how and where CMOs are investing in the complimentary Annual CMO Spend Survey 2019-2020 research by Ewan McIntyre and Anna Maria Virzi. 
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