Because of inflation and economic uncertainty, marketing spend is dropping back closer to pre-COVID levels, according to new data from The CMO Survey, a biannual poll conducted by the American Marketing Association, Deloitte and Duke University’s Fuqua School of Business.
The 314 responses collected in March indicate that marketing expenditures make up an average of 12.3% of a business’s budget. Also, the yearly growth in marketing spending slowed down by an attention-grabbing 72% (10.4% to 2.9%), compared with the last survey.
But interestingly, marketing budgets as a percentage of company revenues have risen to an average of 10.9%.
The natural tendency to cut back on marketing to free up cash when the economy gets unsteady “should be tempered with an understanding of the cost to reaching consumers and what competitors are doing. In fact, inflation may be a chance to leap ahead if others pull back,” Duke University professor Christine Moorman said in a post on the Fuqua School of Business’s blog.
For insights and tips on strategic approaches you can take, check out the ResourcefulFinancePro on-demand webinar “Top 5 Ways Finance Can Help Boost Marketing While Staying Within Budget.”
Digital marketing’s the exception
Digital remains a substantial piece of your peers’ marketing budget pie – 53.8% on average, according to the survey. And while digital marketing spending has slowed, the decrease was less dramatic than that of overall marketing spend (a 15% increase in the last survey vs. an 8.2% increase in the latest survey).
The biggest digital marketing spenders by industry are education (75.5%), technology (65.7%) and health care (64.6%).
Meanwhile, respondents indicated that spending on mobile marketing tactics (currently about 19% of department budgets) will continue to grow. The CMO Survey predicts the growth will be 80% over the course of the next five years. Social media marketing is also expected to rise in similar fashion from its current 17%.
But you’ll want to analyze the trends in your industry first before committing resources to social media channels. On one hand, the survey data shows B2C products and services companies believe social media has an impact on their success. On the other hand, CMOs at B2B-leaning organizations aren’t as impressed with the results, and don’t think social media contributes significantly to business performance.
Moving away from brand development
Respondents say brand development capabilities are important to their company’s success. Yet because they report effectiveness is low, investments are expected to slow in customer relationship management systems, brand building and customer experience – with the largest drop expected in brand building (a 5.5% budget increase predicted vs. 11.7% the previous year).
At the same time, the marketing department’s role at many companies has been broadening to include strategic areas such as:
- revenue growth
- marketing analytics
- market entry strategies, and
According to survey data, companies indicate their top challenges are:
- expanding into new markets
- reducing costs or increasing value for the same cost, and
- developing, acquiring and retaining talent.
It turns out marketers also count these as their top priorities, as well as accelerating the move to new digital technologies. “Having the right technology” was cited by 13.5% (up from 9% three years ago) of marketers as a determining factor for organic growth.
If you’re not already assigning more strategic tasks to marketing, they might just be waiting for you to ask.
Tracking short-term metrics
Speaking of analysis, marketers reported they’re relying more on tactical, short-term metrics like sales revenue, digital performance, content engagement and lead generation, instead of strategic metrics such as brand equity value and customer insight usage.
However, the key strategic metric of brand differentiation has jumped in utilization a whopping 111% since 2021.
Steering clear of ESG for now
Despite the chatter surrounding environmental, social and governance branding, businesses are increasingly hesitant to take political stances – with 70.9% of surveyed leaders saying they don’t think it’s appropriate. Three years ago, that unwillingness percentage was just 18.5%.
However, Moorman believes this is bound to shift because close to 15% of marketing leaders (14.5%) said a labor/skills shortage will be their company’s second-biggest external challenge next year. Plus, marketers are saying that “having the right talent” is the most important factor contributing to organic growth.
“As brand purpose and ESG concerns gain traction, I think this rate will increase as companies see the benefits to their business, especially given tight labor markets that need to work harder to attract top employees,” she said.
What marketing’s saying about customer preferences
Because of inflationary pressures, Moorman said, “Companies may want to consider lowering prices, or offering smaller versions of their offerings that customers can afford, to help them stay loyal until the economy and paychecks stabilize.”
The reason? More than three out of 10 survey respondents (32.3%) said “superior product quality” remains their customers’ top priority for next year. Another top customer priority trend that picked up steam during the past two years is “low price” (18.9%).