Gartner: Marketing Budgets Increased for Third Consecutive Year

Marketing budgets are continuing to rise, according to a survey of marketing executives by Gartner. The survey showed that marketing budgets increased to 12 percent of company revenue in 2016, from 11 percent in 2015. Fifty-seven percent of marketing leaders surveyed expect their budgets will increase further in 2017. However, 14 percent of marketers say they are bracing for budget cuts, up from 3 percent just two years ago.

The findings form part of Gartner's "2016-2017 Chief Marketing Officer (CMO) Spend Survey that included responses from 377 marketers at companies with more than $250 million in annual revenue in North America and the U.K. The survey took place in July and August 2016 and marks the fifth year that Gartner has surveyed marketers on spending priorities and marketing operations.

"Marketing is now responsible for critical customer-facing, revenue-generating systems and applications," said Jake Sorofman, research vice president at Gartner. "As the marketing leaders' mandate broadens, we are seeing the CMOs' marketing tech spending approach the levels of the CIOs' technology spend.

Although marketing budgets have, on average, increased, marketing leaders have many demands on their resources. The top three categories in 2016 marketing spend identified in the survey, web, digital commerce and digital advertising, illustrate how critical digital marketing has become. Digital commerce, in particular, is a recurring theme in this and last year's CMO Spend Survey, signaling the continued importance of these initiatives to marketing leaders. The marketing leaders surveyed said they spend at least 8 percent of the budget on digital commerce.

"Digital commerce matters to marketers on multiple levels, from driving incremental revenue, to measuring attributable performance, to gaining customer insight through direct engagement," said Mr. Sorofman. "In addition, we're seeing marketing leaders look beyond traditional storefronts and shopping carts, investing in rich commerce experiences, experimenting with the Internet of Things and treating digital commerce as a multichannel strategy.

Digital commerce investments remain a high priority with marketing leaders as an important way to meet company growth objectives, particularly in consumer packaged goods (CPGs). Without digital commerce efforts, CPG marketers have limited ability to develop direct relationships with customers, drive loyalty and advocacy, or collect immediate insights. Spending on digital commerce gives CPG marketers the building blocks to complement their indirect channel strategies with direct-to-consumer (DTC) engagement.

Despite concerns over ad effectiveness, opaque industry practices and the increasing use of ad-blocking tools by consumers, digital advertising remains resilient as 65 percent of marketing leaders surveyed said that they plan to increase their spending in this area. Contributing to the increase are a continuing and consistent shift of offline media spending to digital channels, a decline in organic social in favor of paid social and the rising importance of video, which is considerably more expensive than other digital techniques.

"Over the last several years, we've witnessed an expansion of the CMO mandate, from what was largely a promotional role to what is now often seen as the growth engine for the business," said Mr. Sorofman. "This year's survey really drives this point home as CMOs are taking on more formal responsibility. In more than 30 percent of organizations, at least some aspects of sales, IT and customer experience now report into the CMO.