Marketing Budgets Continue To Fall Sharply In 2021 According To A New Survey – Forbes

Throughout 2020, as the COVID-19 crisis jolted businesses across the globe, the majority of brands experienced budget cuts, with some cuts going  well above 15% of the total marketing budget. Data from research firm Gartner CMO Strategic Priorities Survey 2020-2021 showed that most CMOs expected ad spending in 2021 to rebound, as many economies around the world reopen to one degree or another.

The online survey collected responses from 400 marketing executives from industries including consumer products, retail, financial services, media, and travel and hospitality. Eighty-one percent came from companies with $1 billion or more in annual revenue.

It shows that a swift return to pre-pandemic budget levels may be elusive for many marketing organizations. The survey revealed that the proportion of company revenue allocated to marketing was cut almost in half, from an average of 11% in 2020 to just 6% in 2021. This is the lowest proportion allocated to marketing in the history of the survey. 

These findings reflect an ongoing downward pressure on marketing spend caused by the pandemic, and a strategic shift in enterprise resource allocation decisions. Several factors combined to depress marketing budgets: 

  •   Traditionally, marketing budgets had always been first of the enterprise budgets to be cut and the last to be restored at times of crisis. 
  • CFOs now seek to maintain a lower cost base that spending cuts in marketing, alongside savings on real estate and travel costs, have yielded. 
  • CMOs proved that they could do more with less, curbing spending on events, agencies and ad budgets in the face of a crisis. 

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Given the decrease in top-line marketing budgets, this means that all resources will be squeezed, even in strategically important technology investments. 

The customer journey disruptions brought about by the pandemic have prompted CMOs across industries to question long-held beliefs on the relative value of their channel investments. Demand for digital services at the consumer level, the media level and at the enterprise level, is accelerating. Traditional platforms such as linear TV or magazines are losing ground. In the $1.7 trillion global advertising industry, more than 50% is spent on digital platforms. It is now estimated that digital will be almost 70% of the advertising pie by 2024. 

Ad agencies’ share of the total budget has continued to decline year-over-year and advertisers continue to engage significant in-housing activity, and, as CMOs reimagine the capabilities that can be supported by their internal teams. Respondents to this year’s survey reported that 29% of work previously carried out by agencies has moved in-house in the last 12 months. In-housing had evolved from high volume, lower value agency services to high cost and high-margin strategic agency investments. 

The implication is clear. Advertisers need different insights from the external agency into the shifting consumer trends. Secondly, they need agencies with enough flexibility to adapt quickly in response to those trends. 

Another key implication is that channels that have traditionally been seen as drivers of branding, relevance and awareness, such as TV or out-of-home, are now vying for budget alongside those that have been considered as performance marketing channels, such as search and social advertising. Facing a reduction in support, CMOs have reprioritized the spending commitments across their channels and programs. Investments in pure-play digital channels, be they owned, paid or earned dominate CMOs’ investment priorities, accounting for 72% of the total marketing budget. Offline advertising accounts for only 9% of the marketing budget.

Traditionally, brand awareness was the ultimate goal of every marketing strategy, aiming to creating a strong image for the brand. With digital transformation we’ve seen a massive shift towards performance marketing. The truth is that to be effective in the long run is a matter of and not or. Performance marketing may create a jump in short term sales, but it won’t keep your customers coming back again and again. You can sustain performance only with a concurrent brand campaign.

The digital transformation puts newfound pressure on the perennial list of advertiser concerns around strategy, operating model, or efficient use of technology, and has the potential to weaken brands with the shift from reach and branding to direct-to-consumer strategies and the dominance of performance marketing. The key is balance.