Marketing budgets continued their steady ascent in 2016, climbing to 12% of company revenue, according to the Gartner 2016-2017 CMO Spend Survey. The survey polled over 300 marketing leaders across the U.S. and U.K. to uncover how much their companies spend on marketing and what budgets reveal about marketing’s competing priorities to improve short-term performance and long-term customer experience.
“Survey findings show how marketing organizations, through their spending priorities, continue to lead the charge in a data-driven, digitally led world,” noted Gartner for Marketers research vice president Jake Sorofman.
The 2016-2017 survey confirms the third consecutive year of budget increases
The 2016-2017 survey confirms the third consecutive year of budget increases. Larger companies (>$5 billion revenue) spend 13% of revenue on marketing versus smaller companies ($250 million to $500 million revenue) that spend roughly 10% of annual revenue. Scale, innovation spend and competitive pressure reflect the difference.
Action: Measure your budget against benchmarks to be sure you’re not underfunding or overfunding your marketing operation relative to competitors or peers.
Signs of caution
While the majority of marketers expect increases in 2017, 14% are bracing for a cut. This is up from only 3% who expected cuts in the 2014-2015 survey and is the highest reported in the survey’s five-year history. Twenty-four percent of marketers at media companies say their budgets will decline in 2017 compared with last year.
Action: To make the most of tight budgets, look to rebalance your in-house/outsource talent mix. Explore outsourced capabilities you can bring in-house to reduce costs and increase internal competencies. Also look to see if there are any in-house activities that could be more efficient if they were outsourced.
Spending focus shows digital marketing’s muscle
Marketing leaders spent more on their websites, digital commerce and digital advertising than on other categories in 2016. These top three categories of 2016 spend illustrate that, while digital has become integral to all marketing activities, pure digital marketing investments remain a top priority.
Website spending tops the list
Marketers spent 9% of their budgets on websites, the most out of 14 spend categories surveyed. Website spending increased to 14% of the budget for marketing leaders from media, including publishers and entertainment companies. This is consistent with a broader trend of replatforming websites to provide richer, more responsive, more personalized experiences.
Action: When making decisions about where to budget for 2017, balance your spending between short-term tactics and initiatives that can bring long-term improvements to the customer experience and brand-building efforts. Be careful not to develop a short-term mindset because you have immediate access to information.
Digital commerce is a key focal point
Spend on digital commerce accounted for 8% of the marketing budget (second-highest category) and is No. 1 in many vertical industries. B2C marketers spend a higher percentage (9%) on digital commerce than B2B marketers (7%). Marketing leaders in retail and financial services both spend 9% on digital commerce, the highest reported in the survey results, exceeding the amount spent on websites. Digital commerce is also where CPG marketers are making their top investments to meet 2017 company goals. This digital commerce spending is driven by a desire to build direct-to-consumer (DTC) engagement, in part to drive incremental revenue, but more importantly, to gain customer insight and secure brand preference and loyalty.
Action: Collaborate with sales and service organizations to identify processes where digital commerce could streamline the customer experience or business operations. Prioritize and execute those with greatest business impact.
Digital advertising on the rise
Despite concerns over ad blocking and questions about effectiveness, nearly two-thirds of marketing leaders plan to increase spending on digital advertising in 2017. Out of 14 categories of marketing activity, 65% of marketing leaders surveyed told us they plan to increase their spending on digital advertising.
Factors contributing to the digital advertising increase include:
- A continuing and consistent shift of offline media spending to digital advertising
- Decline of organic social in favor of paid social
- The rising importance of video, which is more expensive than other digital techniques
Action: Refine your use of attribution and marketing mix modeling to measure the impact of marketing and media efforts. Work with publishers and agency partners to continuously test new ad formats and ensure your digital advertising investments conform to the same standards of measurement and accountability as other marketing investments.