Although marketing budgets have dropped below 11% of total company revenue for the first time since 2014, CMOs remain optimistic about the outlook for 2020, according to Gartner’s CMO Spend Survey 2019-2020 report.
Marketing budgets declined from 11.2% of overall company revenue in 2018 to 10.5% this year, the survey of more than 340 marketing executives in North America and the U.K. found.
But nearly two-thirds (61%) of CMOs expect their budgets to rebound next year.
"In the face of perplexing external and internal environmental signals, CMOs remain confident about economic and budgetary outlooks,” commented Ewan McIntyre, vice president analyst in Gartner's Marketing practice.
"However, that same percentage of marketing executives believed their budgets would increase in 2019, indicating their optimism is misplaced. While we're not yet witnessing a precipitous drop in budgets, this year's downtick presents a counterintuitive scenario. You could call this confidence in the face of adversity. Or you could call it hubris.”
Agencies Still 22% of Budgets
The survey also found that, despite a well-documented shift of some marketing functions from agencies to in-house teams, marketing agencies still account for nearly a quarter (22%) of total marketing budgets.
"While in-housing may be à la mode, agencies still offer an unparalleled breadth of scope, economies of scale and an ability to offer much-needed, external strategic input," McIntyre said.
Marketing technology investments, on the other hand, fell to 26% of overall marketing budgets this year, down three percentage points from 2018.
Gartner notes that its 2019 Marketing Organization Survey found that 24% of marketers believe that martech strategy, adoption and use is one of the top three weaknesses in their company's ability to drive customer acquisition or loyalty. Further, more than 25% blame the martech strategy weaknesses on insufficient budget, resources or capabilities.
Paid Media Spend Up, With Digital Still Dominating
Marketing spend on paid media rose from 23% in 2018 to 26% in 2019, with digital channels accounting for 16% of marketing budgets.
Despite ongoing struggles with digital advertising viewability and fraud, 78% of CMOs say they expect to increase digital spending in 2020.
"As organic reach on social platforms plummets to zero, and confidence in influencer marketing is challenged, paid media presents more pros than cons for CMOs," observed McIntyre.
However, CMOs are also investing across paid, owned and earned media channels. Offline advertising and TV spend remain strong, with each expected to have a 7% share of total marketing budgets this year.
Analytics Emphasis Grows
CMOs cite competitive insights and analytics as the two most important capabilities supporting the delivery of their marketing strategies over the next 18 months.
Marketing analytics is the single largest area of investment, accounting for 16% of the budget allocated to marketing programs and operational areas.
However, a 2018 Gartner assessment found that marketing maturity levels are still lacking — meaning that marketing departments are not necessarily delivering the transformative results expectations their companies have as a result of increased investment in data and analytics.
"Failure to deliver against inflated expectations in data and analytics may come at the expense of future funding commitments," warns McIntyre.