Image Source: Gartner, Inc.
The Gartner survey was conducted from March through May of this year. The survey produced 400 responses from marketing decision makers and influencers located in North America, Europe and the UK. Respondents were with organizations operating in nine industry verticals, and 81% were with organizations having $1 billion or more in annual revenue. Therefore, this survey primarily captured the perspectives and experiences of marketers in large enterprises.
Gartner expressly noted that the results of this survey do not represent the market as a whole, but only reflect the sentiments of the respondents surveyed.
Marketing Budgets Fall
The "headline" finding of the Gartner research points to a significant decline in marketing budgets as a proportion of company revenue. Gartner found that the mean percentage of total company revenue allocated to marketing in 2021 is 6.4%, down from an average of 11% in 2020.
The mean percentage of revenue allocated to marketing in 2021 is about the same in both B2B and B2C companies. The mean percentage for B2B companies represented in the survey was 6.2%, while the mean percentage for B2C companies was 6.6%.
Gartner's research also revealed that marketing budgets (as a percentage of revenue) declined in all nine of the industries represented in the survey, although the impact varied considerably. In manufacturing companies, the mean percentage of total company revenue devoted to marketing fell from 12.7% in 2020 to 5.8% in 2021, a decline of 6.9 percentage points. In contrast, the mean percentage in consumer products companies declined by only 2.5 percentage points.
Digital Channels Dominate
The Gartner survey found the pure-play digital marketing channels now command more than 70% of the total marketing budget in the average company represented in the survey. However, the survey also revealed that companies' investment plans for both digital and offline channels vary considerably.
The following table shows the percentages of B2B survey respondents who said they are increasing and decreasing their investments (2021 vs. 2020) in the marketing channels covered in the survey. These responses indicate that B2B survey respondents are taking diverse approaches to budget allocation decisions.
It's also noteworthy that cost savings was not a primary driver of the changes in channel priorities. Only 24% of the survey respondents said they had reprioritized channels in order to reduce costs.
In the webinar materials, Gartner argued that "the age of the digital versus offline budget has come to an end." The firm noted that 24% of the budget traditionally spent on TV is expected to shift from broadcast and cable TV to streaming video this year.
Other Important Findings
Gartner's survey produced several other interesting findings. Here are a few of the other major results.
Martech Spending - Marketing technology still commands the largest proportion of the marketing budget. In 2021, the mean percentage of the total marketing budget allocated to martech was 26.6%, up slightly from 2020 (26.2%). In addition, more than two-thirds (68%) of the survey respondents said they expect their martech budget to increase further in the next fiscal year.
Budget Allocations for Programs and Operational Areas - Gartner also asked survey participants how they allocated their budget across ten marketing programs and operational areas. The top four programs/operational areas (by mean percentage of budget) were:
- Digital commerce (12.3%)
- Marketing operations (11.9%)
- Brand strategy (11.3%)
- Marketing analytics (11.0%)
In-Housing Continues - In the 2021 survey, the mean percentage of total marketing budget allocated to external agencies was 23.0%, down slightly from 23.7% in the 2020 edition of the survey. But this slight decline doesn't tell the whole story. The respondents to the 2021 survey reported that 26% of the work previously outsourced to external agencies had been moved in-house over the preceding 12 months.
Gartner's latest CMO Spend Survey provides several important insights for marketers, but I'm a little perplexed by the survey's finding about the "decline" in marketing budgets. Real-time data regarding total marketing spending is difficult to obtain, but we do have relatively current data about advertising spending. And most of that data indicates that advertising spending is showing a significant rebound compared to 2020. For example:
- According to Standard Media Index's U.S. Ad Market Tracker, the U.S. advertising economy grew 35.2% in June, compared to June of 2020. This was the fourth consecutive month of double-digit growth compared to the same months of last year. The June figure also represented a slight increase (0.03%). compared to June of 2019.
- Advertising revenues for the first six months of 2021 at both Alphabet (the parent company of Google) and Facebook grew by about 50% compared to the first six months of last year, according to the companies' earnings reports.
The next edition of The CMO Survey directed by Dr. Christine Moorman at Duke University's Fuqua School of Business should be published later this month. That survey normally asks participants about their marketing budgets as a percentage of company revenue and about changes in the marketing budget in the prior 12 months. It will be interesting to see if the findings of this research line up with the findings of Gartner's survey.