While earlier Gartner studies on CMO Spend talked about growing marketing budgets, this year’s study reports the opposite. Marketing managers are increasingly asked to defend their spending and show the financial gains to secure future marketing budgets.Read the key findings from this study as well as recommended actions in our blog post.
HALF OF THE CMOS LACK FINANCIAL PLANNING
When it comes to deciding on a marketing budget, the analytics maturity lags behind in many companies. CMOs are required to explain their budget planning by predicting the company’s revenue. But only half of all CMOs use advanced methods to truly justify their planning.A great number of CMOs rely on simple methods by either taking last year’s budget, or using that as a basis and including a percentage increase or decrease. The problem is: Planning a budget with historical data relies on the assumption that all past decisions were and will be correct. If this logic fails, however, CMOs could be making inefficient investments.
Marketing measures need to be reviewed, based on costs and required resources, as to how valuable they are for marketing and overall company goals. The annual budgeting process should be restructured to allocate budgets to those measures that drive the highest revenue. And they should remain flexible enough for possible adjustments.
Advertisers should avoid typical budget traps, such as outdated assumptions, incoherent planning and blind trust in previous planning processes.
THE BIGGEST CHUNK (9.2%) OF MARKETING BUDGETS GOES TO MARKETING ANALYTICS
This year, analytics is the no. 1 marketing expense. Last year it was still in fourth place, behind the website, digital trade and digital advertising.
Source: Gartner CMO Spend Survey 2017-2018
This strong emphasis on analytics is a consequence of marketing managers often having to fight for their budgets. Analytics helps advertisers to identify and understand potential customers and extend the contact on an individual basis. All marketing measures need to focus on the right target groups, so budgets are used efficiently.
The marketing performance can be measured and optimized. Since more and more is being spent on analytical instruments, they should also drive valuable results and recommendations for action. However, investing in analytic tools does not guarantee a data-driven marketing success. Marketing measures should therefore be metric-oriented, and the prevailing marketing culture should be adjusted to data-driven decisions and optimizations.
Large companies should hire a marketing analytics manager to come up with a holistic analytics strategy and ensure that investments and resources are prioritized based on their value for the company. Tool investments should be centralized and platforms or tools without any added value should be neglected. Smaller-sized companies should at least use a tool to monitor and optimize their marketing activities regularly.
CMOS WITHDRAW MARTECH EXPENSES
With 22% of the marketing budget, MarTech is still a major marketing expense. However, that number has been decreasing over the years. In 2017, MarTech received 27% of the budget. This decrease, Gartner explains, is the result of the rapid rise of new technologies and processes, with a respectively high learning curve. But at the moment, only half of all CMOs think they are able to master new technologies effectively.
Furthermore, poorly performing or unused marketing technologies force marketing teams and agencies to keep relying on manual processes which compromises the marketing efficiency and effectiveness.
CMOs are required to prove the company value of large investments in MarTech. Under pressure from CFOs and CIOs, they need to improve the MarTech capabilities and justify their technologies.
CMOs should come up with a MarTech plan that captures the company’s requirements, one that allows proving the value of the MarTech eco system towards the company goals.
The ROI of marketing investments should be maximized. To do so, CMOs need a complete picture of the costs in conjunction with their respective benefits. Irrelevant costs should be cut. Instead, CMOs should focus on in-house resources, external support and technology costs. The ROI calculation should serve as central input for marketing planning.
Marketing channels should also be rated according to their impact on the customer journey, and optimized using data-driven attribution methods. Gartner recommends using marketing mix modeling to fully understand the dynamic of media mixes for budget decisions.
MARKETING INNOVATION REMAINS PROTECTED FROM BUDGET PRESSURE AND RETAINS 105 OF THE BUDGET
At 10% of the overall expenditure, innovation remains a CMO priority. Almost one quarter of all CMOs (23%) now have a fixed annual budget for innovations. Companies that don’t invest in innovation, increasingly run the risk of missing out on chances, which could be exploited by the competition.
Source: Gartner CMO Spend Survey 2017-2018
Nevertheless, there are doubts in terms of the extent of innovation programs and how to prioritize, develop and handle innovation ideas.
The role of innovation should be clearly defined in any marketing organization. The differences between low-risk, small-format optimizations with short-term financial benefits and high-risk, long-term innovation programs should be made clear.
CMOs should proactively communicate risks to marketing stakeholders in conjunction with the innovation portfolio. It should be clear when and how the company will benefit from the different programs.