Anyone searching for signs of a “Covid bounce” in the marketing industry might want to look away now; Gartner reports that budgets have fallen to record levels, plummeting to 6.4% of company revenue in 2021 from 11% in 2020.
In the annual Gartner CMO Spend Survey, Gartner quizzed 400 marketing leaders in the UK, France, Germany and North America from March 2021 through May 2021, tracking the critical areas marketers are investing in and where cuts are being made from people, programmes and technology.
Ewan McIntyre, co-chief of research and vice president analyst in the Gartner for Marketers practice, said that despite facing in-year budget cuts in 2020 due to the pandemic, most marketing chiefs expected budgets to bounce back in 2021.
However, he added: “This budgetary optimism was misplaced, as marketing budgets have fallen to their lowest level in the history of Gartner’s CMO Spend Survey. These cuts have been a slow burn over the course of the last year, where many marketing budgets have not recovered what was originally lost.”
No one – regardless of company size or industry – has escaped swinging cuts in marketing budgets, the report reveals. In fact, no industry achieved a double-digit budget in 2021. Travel and hospitality, manufacturing and tech product companies have experienced the greatest cuts in 2021.
Meanwhile, consumer products companies reported the strongest 2021 marketing budgets at 8.3% of company revenue. Large enterprises were hit the hardest – companies with revenue of more than $2bn reported the lowest average marketing budget of just 5.7%. On the other hand, companies with revenue of under $500m reported the highest allocation to marketing with an average budget of 8.6% of revenue.
The research shows CMOs have shifted spending commitments across their channels and programmes, with pure-play digital channels – owned, paid and earned – dominating those priorities and accounting for 72.2% of the total marketing budget.
When looking at the largest resource allocation – agencies, media, labour and paid media – agency spend continues to decline. “Albeit a small dip from 23.7% in 2020 to 23% in 2021, this continual change indicates significant in-housing activity, as CMOs reimagine the capabilities that can be supported by their internal teams,” added McIntyre.
CMOs report that 29% of work previously carried out by agencies has moved in-house in the last 12-months alone. The focus of in-housing is changing as well – with brand strategy, innovation and technology, and marketing strategy development making up the top three capabilities areas CMOs are moving to internal teams. Meanwhile, martech continues to dominate, taking up 26.6% of the total budget.
With 2020 and 2021 also witnessing drastic changes to customer buying journeys – both B2C and B2B alike – even digital late-comers have been forced to accept the inevitable shift to online channels.
When looking at budget allocation by programmes and operational areas, CMOs report digital commerce makes up 12.3% of the total budget. Likewise, marketing operations and brand strategy make up 11.9% and 11.3% of the total budget.
Worryingly, while marketing analytics still commands 11% of the total budget, it has continuously dropped in prioritisation – now in the fourth position in 2021.
McIntyre explained: “CMOs continue to invest in marketing data and analytics, however, for many, the results have failed to live-up to expectations. Given recent and upcoming regulations, and changes in data collection, we expect this investment area to continue to be a strategically important capability, but also to continue to fluctuate until uncertainties subside.”
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