Commentary

Gartner: Balancing Marketing Budgets In The COVID-19 Era

What you spend says so much more than what you intend. Measures of budgetary commitment get to the heart of marketing’s strategies, and the stories that underpin them. And 2020 has been a year with more plot twists than an Agatha Christie novel.

It has been a volatile year for marketing budgets. Things started well, and the mean average marketing budget in early 2020 was on par with 2019’s, according to the latest findings in the Gartner CMO Spend Survey 2020.

But then COVID-19 hit. In the early stages of the crisis, budgets began to deviate from the norm, with almost half of CMOs reporting a budget cut of more than 5% -- many reporting cuts of more than 15%.

The crisis also offered an opportunity to some, with almost a third of CMOs in April and May reporting budget increases. It was clear that the pandemic impacted different companies in different ways -- even within the same industry.

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Regardless of differences in near-term budget commitments, confidence in future budgetary growth remained intact. Seventy-three percent of CMOs across all industries stated that they thought the negative impacts of COVID would pass quickly, and they would be back to business as usual in short order. 

But this is a story of twists and turns. As the year progressed, the oft-touted “new normal” drifted ever further into the distance, and marketing’s confidence started to wane.

A poll of marketers in mid-July showed that the proportion of marketing leaders expecting an in-year budget cut had grown to 59% -- a jump of fifteen percentage points in less than two months.

What’s more, almost a third of respondents expected a cut of more than 15%.

So -- time to take a haircut in 2020, but the prospect of a brighter 2021 still seemed possible, right?

The enterprise needs to grow out of this crisis, and marketing is central to this growth. As we edge toward the end of a tumultuous year, the noise coming from the board of directors does not bode well for marketing.

Gartner recently polled enterprise leaders, asking about their expected budgetary changes in 2021.

The data revealed a clear focus on growth and digital transformation, with anticipated increased budgets for IT, product development and R&D. However, marketing is one of the functions earmarked for further cuts in the new year, as the board seeks to restore the enterprise’s financial health.  

COVID is not the first crisis to hit the enterprise in recent years. Much can be learned from the Great Recession just over a decade ago.

The standard pattern shows that marketing is the function that feels budgetary pressure first and is the last to see its budgets restored post-crisis. But rather than bemoan the situation, marketing must take positive, proactive steps.

And these steps should apply regardless of which movements you have seen in budgets so far this year.

What’s required is strategic cost optimization -- a programmatic approach that focuses on:

  • Proving the value of marketing to stakeholders in the enterprise -- focusing on those that have the greatest influence on current and future investments
  • Improving the productivity and efficiency of investments -- ensuring that utility and return are maximized across all elements of marketing’s operations
  • Prioritizing marketing’s investments -- shifting spend from budget lines that have weak alignment to enterprise goals

Alongside a new approach to marketing costs, increased strategic agility is essential.

But we’re all agile now, aren’t we? According to Gartner data, the majority of CMOs state that they have adopted elements of agile marketing. But this is largely restricted to agile project management, or some elements of agile operations.

In reality, our analysis shows that while the majority of enterprise leaders consider agile, adaptive planning to be critical, most still build their plans in the traditional way.

The future prosperity of marketing is dependent on planning, executing and optimizing investments on an ongoing basis. The story of 2020 may have been one of significant twists and turns, but when COVID is a distant memory, its lessons will still resonate.

The era of value-based marketing and adaptive planning is here to stay.

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