It’s not the dollar in your pocket that matters. What counts is what that dollar can buy.
That’s according to new research from Gartner’s annual CMO Spend and Strategy Survey.
The results show that CMOs are pricing disruption into their 2024 marketing budgets as they realize that economic volatility has become the new normal.
The new data reveals that the average marketing spend has increased from 6.4% of company revenue in 2021 to 9.1% in 2023. But 2023 marketing budgets still aren’t what they were between 2018-2020, which was nearly 11% of a company’s revenue.
At the same time, marketing costs have been climbing. According to research from McKinsey, the average cost per click was 20 percentage points higher in 2022 than in 2021.
As enterprises work to contain expenses when economic fear strikes, marketing and PR budgets are often the first to get a trim.
Meanwhile, expectations for these programs have only increased.
In fact, 75% of CMOs report being asked to do more with less in 2023.
Many of these CMOs are readjusting their commitments to marketing channels, resources and programs.
In times of uncertainty, there are some top considerations marketing executives should keep in mind as they plan their 2024 marketing budgets:
Don’t underestimate the power of consistency. The companies that do best in times of volatility are the companies that continue to market and innovate. After all, marketing serves as a brand champion, and maintaining a solid and consistent brand image creates familiarity and reliability, increasing the chances that consumers will choose a product or service over others — regardless of market fluctuations. In fact, research shows enterprises that preserve or increase marketing budgets during times of uncertainty maintain or even add market share.
At the same time, maintain flexibility and agility. Maintaining a flexible marketing budget allows room for experimentation and innovation. Rather than reducing budget, marketing leaders should consider shifting spending and resource allocation.
Assess marketing effectiveness. A smart CMO leverages data analytics and consumer insights to understand which strategies have worked well in the past, resulting in higher engagement rates and conversions, and those that haven’t yielded good results. This is a key factor in determining priorities for budget planning. Matt Durham, head of market strategy at Digibee, a provider of integration-platform-as-a-service (iPaaS) solutions, explains: “Budget planning always starts with the top line budget, that is, what are revenue goals next year? The budget for marketing then has to take into account those goals and how to achieve them. History is of course important, both because of the reality that most budgets are based on prior year’s reality and because performance from the prior year is frequently a good indicator of future performance.”
Align on top priorities. Effective planning is key to success. Prior to allocating funds, marketing leaders should identify top priorities based on what will truly drive their organization forward. This means getting on the same page as the CEO and CFO to prioritize revenue-generating initiatives and develop plans that support their overall business goals. Girish Bhat, CMO of Wallarm, an API and App Security startup, describes his approach: “In a hyper-competitive market, my plan involves a strategic focus on branding, aligning strategies, execution to achieve our business outcomes, investing in digital initiatives, and embedding media and PR across our GTM efforts. As a cybersecurity startup, innovation and agility are what we thrive on and my budget reflects this commitment.”
Consider how a public relations program can be a powerful component of your marketing strategy. Today’s marketing leaders have an unprecedented ability to build and drive smart, nimble and strategic PR programs. Creating a PR component that integrates with your marketing campaigns is key to driving momentum and maximum effectiveness, leading to increased brand awareness and sales.
Set realistic goals and KPIs. A strategic marketing leader understands what theyhope to achieve with each campaign and makes sure those objectives align with what’s possible. Objectives should have quantifiable metrics that can measure progress and be easily adjusted. Generating brand awareness and establishing customer relationships can be just as critical for long-term success as goals with immediate ROI.
Leverage new platforms and technologies. According to Gartner’s 2023CMO Spend and Strategy Survey, tech utilization rates are falling, dropping from 58% in 2020 to 42% in 2022. But leveraging automation tools and generative AI can be a game-changing strategy that can improve effectiveness and provide opportunities for cost savings. Some examples of this are automated email campaigns and programmatic ad buying. When planning 2024 marketing budgets, CMOs and other marketing leaders should make technology optimization a goal to drive up utilization rates and ROI.
Develop a growth mindset. A cost-cutting mindset for short-term gains often leads to failure. The most successful marketing leaders will bring a growth mindset to their 2024 planning. CMOs and marketing executives that have a growth mindset embrace a learning approach and will do the hard work to determine the best strategies to drive new value, demand, customers and revenue. In fact, research from McKinsey reveals that during the Great Recession of 2008, companies that drove growth during economic volatility achieved above-market shareholder returns for the next 10 years. Growth is the key to achieving competitive advantage in moments of uncertainty.