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CMO spending on paid media soars at the expense of talent, tech and agencies

Gartner survey shows how B2B marketing leaders divvy up ‘anemic’ marketing budgets, which are at the lowest levels in four years

If it feels like your marketing budget is tight, you are not alone. Marketing budgets are at their lowest point since businesses slashed budgets following the pandemic.

That is according to Gartner, which published a new poll of 395 CMOs across North America and Europe.

Overall marketing budgets tallied at 7.7% of revenue – down from 9.1% in 2023, even further below the 10% industry benchmark, and off more than 3% from its all-time high in 2020.

When this same survey came out last year (2023) showing marketing budgets had fallen to 9.1% of revenue from 9.5% – the vast majority of CMOs (71%) said they lacked the budget to execute their marketing strategy. This year things have gone from bad to worse: that number is even lower.

“CMOs are living in an ‘era of less’,” said Ewan McIntyre, VP Analyst and the Chief of Research for the Gartner Marketing Practice. “In the four years preceding the pandemic, average marketing budgets were 11% of overall revenue. In the four years since they’ve dropped to an anemic 8.2%.”

It’s worth underscoring the analyst’s word to describe marketing budgets: anemic.

You can’t do “more with less,” forever

Mathematically, it’s possible to divide a number by two infinitely and never run out of operations to perform. Marketing budgets, however, just don’t work like that. So, budget cuts mean CMOs are faced with the difficult challenge of trying to make the budget go as far as possible.

So where are CMOs spending?  According to the survey:

“Digital dominates a growing share of paid media spend, taking 57.1% of budgets in 2024, up from 54.9% in 2023. Top channels include search (13.6%), social advertising (12.2%) and digital display advertising (10.7%). Among offline channels, event marketing (17.1%), sponsorship (16.4%) and TV (16%) were the top channels for investment.”

I’m struck by the graphic of this spend (see below – they abbreviated Y-axis which accentuates the point). You can see the spike in paid media is coming at the expense of in-house talent, marketing technology and outside help.

As McIntyre wrote in Harvard Business Review about this time last year, “nobody got fired for spending more on digital.”

Paid media spending is a sugar-high

The breakout suggests to me that CMOs don’t have the staffing or tools to carry out their mandate. There’s headcount pressure so they can’t hire internally. They don’t have the budget to hire outside help or additional tech tools. And yet the business has raised expectations for marketing results.

A separate survey of 292 CMOs I wrote about last week (Duke CMO survey) supports this interpretation. Marketing leaders explicitly said, if they got more budget this year, the number one marketing priority they’d invest in is in-house talent.

When you need results in a hurry, CMOs spend money on paid media. When you don’t have talent to create new content, you repurpose the old and throw a bunch of money at PPC and social ads hoping people will fill out a form. It’ll give companies the sugar high they desire, but it goes by quick, and the feeling ends abruptly.

AI as the saving grace?

The survey announcement suggests AI, and particularly generative AI, will be what saves CMOs.

“Reduced budgets are only a problem if marketing leaders are working with the same tools as before – that’s not the case now that CMOs have AI,” said McIntyre in the press release. “GenAI is delivering enhanced productivity, despite constrained resources.”

Yet, I find this to be an odd conclusion for several reasons.

First, this same survey shows that CMOs have cut back on technology procurement. You don’t get AI by procuring manila folders and staples, so if you are buying AI, you must buy tech.

And tech spending has fallen in marketing as the graphic (above) shows. Unless they’ve already bought this magical software that will solve all marketing problems, they aren’t likely to get it this year.

Second, just 10 months ago, in August of 2023, Gartner placed generative AI at the “peak of inflated expectations.” This means we are about to slide into the “trough of disillusionment” which the same report says will take, collectively, 2-5 years to navigiate.

In plain English, we’re still figuring out how to make it work. The negative media coverage will pump the brakes on business investments in AI until that’s sorted out.

Did we plow through that trough in less than a year? Unlikely.

AI, marketing and process maturity

Generative AI is the part of AI that we can all “see” (as opposed to some of the back-end analysis tools that we don’t). Because we can see it, we know it still needs lots of human intervention to be usable.

Anyone who’s worked in B2B technology for more than a minute has seen organizational maturity charts. These are usually rolled out with a white paper or manifesto – mapping the introduction of a new technologies. The idea is you can review these documents and see how your organization’s usage maturity maps comparatively.

Typically, these models try to classify an organization’s process maturity around a given technology as “reactive,” “proactive,” and “optimized” (different models may choose different doctrinal terms, but the meaning is similar). I’d venture the vast majority of B2B marketing departments are still in the reactive phase in using generative AI – with a long journey ahead of most of us still.

To be clear, I’m an advocate of technology and experimentation; there are solid AI use cases. Yet we are not anywhere closer to replacing the whole marketing department with AI – and yet that’s what businesses seem to be hoping will happen. The risk for those B2B tech companies holding out for this hope…is that their competition does not.

There is reason for optimism

For its part, the Duke CMO survey indicated that optimism among marketers is rising. It represents this optimism as a score of 67% on a scale of 100. That’s up from 58.3% on the same survey year-over-year, and it’s entirely well-placed.

Why?

Downturns don’t last forever. 

The tech sector usually takes a hit before the rest of the economy – which also means it bounces back sooner. We saw lots of layoffs in technology at the beginning of 2023 – in the name of profitable growth – and again at the end for those that didn’t cut earlier in the year. For the most part, there’s simply nothing left to cut.

The full survey announcement from Gartner is available online: Gartner CMO survey reveals marketing budgets have dropped to 7.7% of overall company revenue in 2024.

>>> Need an extra pair of hands? Sword and the Script Media can help with B2B marketing, PR and social media.

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Image credit: Unsplash and Gartner 

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