Growth in Marketing Budgets Stalled in 2017

Growth in marketing budgets has stalled after continued increases over recent years, according to a survey by Gartner. The survey found that marketing budgets hit a plateau in 2017 after three years of growth, with budgets falling from 12.1 per cent of company revenue in 2016 to 11.3 per cent in 2017, representing a return to 2015 levels.

Chief marketing officers (CMOs) have modest expectations in 2018. Only 15 percent say they expect a significant increase in budget; 52 percent expect a slight increase. One-third expect their budgets will be cut or frozen.

2017 has been a year of significant macroenvironmental upheaval, in terms of both global politics and natural disasters. Marketing is not immune to the business impact that stems from such incidents. There is also evidence that CMOs may have become distracted, either by a heavy focus on operational and tactical measures of performance, or by large, cross-functional initiatives such as customer experience (CX) programs that have yet to provide hard economic benefits.

Not all organizations have felt the impact to the same extent. Extra-large businesses have been shielded from cuts thus far, and cuts have varied across industries, with retail and manufacturing hit hardest. While Gartner predicted these cuts, they will come as a surprise to many CMOs. Only 14 percent of respondents surveyed in last year's CMO Spend Survey anticipated cuts in 2017, meaning many CMOs will be ill-prepared for change.

The survey found that two-thirds (67 percent) of CMOs plan to increase investment in digital advertising, while traditional media faces budget losses. More than half of CMOs expect their investments in event marketing and partner/channel marketing to fall or flatline, with 63 percent of marketers stating they expect flat growth or cuts in offline advertising investment.

At the same time, investments are growing across a range of digital channels, including websites (61 percent of CMOs expect to increase investment) and mobile (59 percent expect to increase spending). CMOs also show a strong and continued commitment to social marketing, with 64 percent planning to boost budgets.

Measurability is a contributing factor to digital media budget growth. CMOs' focus on analytics reflects the need to demonstrate marketing and advertising performance and effectiveness to the business. The multichannel journey demands that marketing leaders go further than channel performance metrics and challenges them to employ advanced analytics to answer the elusive total marketing ROI question.

Marketing technology (martech) spending has fallen by 15 percent in 2017, as CMOs pull back on previous high spending commitments amid concerns over marketing's capability to acquire and manage technology effectively. Martech continues to account for a significant proportion of CMOs' spending power, with 22 percent of the total marketing expense budget allocated to technology. However, this is a significant drop year over year, as last year's survey reported that 27 percent of marketing budget was allocated to martech.