Despite C-suite chaos, CMOs remain optimistic about post-COVID budgets

by | Jul 14, 2020 | Covid-19, Marketing, Public Relations

Not surprisingly, many companies have cut back on marketing budgets due to COVID-19, but new research from research and advisory company Gartner finds that nearly three-quarters (73 percent) of chief marketers expect the pandemic’s negative impact to be short lived, and they have a positive outlook for business performance in the next 18-24 months.

In fact, according to the firm’s newly released CMO Spend Survey 2020, CMOs report they expect to increase investments across major channels and resource areas in 2021, even though Gartner warns that this outlook may be overly optimistic.

“Marketers remain stoic in the face of adversity and are significantly out of step with other members of the C-suite,” said Ewan McIntyre, vice president analyst for Gartner for Marketers, in a news release. “We are seeing a significant number of CEOs and CFOs building scenario plans that include a second wave of the COVID-19 pandemic. As we progress into the ‘recover’ and ‘renew’ phases of this pandemic, CFOs will turn their attention to profitability, and marketing has the dubious honor of topping the list of functions where finance will look to trim expenses even further.”

While pre-COVID-19 marketing budgets remained flat year-over-year, making up 11 percent of overall company revenue, more than 44 percent of CMOs have experienced mid-year budget cuts as a result of the pandemic and 10.7 percent of those expect their budgets to face significant cuts of more than 15 percent.

“Therefore, CMOs should plan for future budgetary pressures now, rather than gamble on budgets bouncing back,” added McIntyre. “The brands that succeed in uncertain times are those that recognize the change around them and adjust to it, rather than wait for things to go back to normal. CMOs need to build a plan that sets out the costs that can be eliminated, the essential costs that must be shielded and the costs where greater efficiency and ROI can be delivered.”

The survey, conducted with more than 430 marketing executives in North America, the U.K., France and Germany from April 2020 through May 2020, tracks the critical areas marketers are investing in and where cuts are being made from people, programs and technologies. The report looks at how much companies spend on marketing, how those budgets align with strategic priorities, how they will change in 2021 and why.

Key findings from the survey include:

Brand strategy now prioritized over analytics

As a direct result of the COVID-19 pandemic and other market uncertainty this year, CMOs (33 percent) now rank brand strategy as one of the top three strategic priorities. This is a significant leap from the lowly position near the bottom of the list in 2019, and the first time brand has surpassed other capabilities like analytics, personalization and marketing technology.

“Brand awareness and relevance in times of strife is more important than ever,” said McIntyre. “We are seeing successful brands take action that is authentically connected to their brand strategy and value proposition.”

Meanwhile, analytics still remains a top priority but has dropped nearly 10 percentage points year-over-year, with only 27 percent of CMOs ranking it a top three priority. This is because marketers continue to struggle to build even rudimentary analytics capabilities. Another previously strong strategic priority that has lost emphasis in 2020 is personalization, dropping to only 14 percent. This drop emphasizes the Gartner prediction that 85 percent of marketers will abandon their personalization efforts by 2025 due to a lack of ROI, the perils of customer data management or both.

Martech survives first round of COVID-19 cuts—for now

Despite uncertain times, martech investments have survived unscathed so far—still making up 26 percent of marketing budgets in 2020. Combine that with the fact that 68 percent of CMOs report they expect to increase their investments in martech over the next 12 months.

“CMOs believe technology will help them navigate through difficult times and recover faster, and thus will continue to shield these investments—like customer data platforms, mobile marketing platforms and digital commerce—from further cost efficiencies,” added McIntyre.

However, an ongoing challenge for CMOs remains utilization, as marketers report using only 58 percent of their martech stack’s full capabilities. If martech investments continue to not deliver the returns expected, they could become an easy target for future cuts.

Digital dominates multichannel marketing mix

Another area that has seen significant change year-over-year is digital, with the COVID-19 pandemic accelerating many organizations’ moves online. In 2020, investments in paid, owned and earned digital channels now account for almost 80 percent of multichannel budgets, with digital advertising and search advertising taking nearly a quarter (22 percent), social marketing (11.3 percent) and website (10.4 percent) topping the list.

While budgets have still been hit in 2020, with 28 percent of CMOs stating they have cancelled media buys, marketers remain confident on the outlook for paid media in the next 12 months. Seventy-four percent of CMOs report they will increase spending on digital advertising and 66 percent expect to increase spending on paid search. “CMOs should tread lightly with their expectations for paid media in the months ahead, as solid investments are likely to weaken as economic challenges following the global pandemic persist,” said McIntyre.

Gartner clients can download the full report here and here.

Richard Carufel
Richard Carufel is editor of Bulldog Reporter and the Daily ’Dog, one of the web’s leading sources of PR and marketing communications news and opinions. He has been reporting on the PR and communications industry for over 17 years, and has interviewed hundreds of journalists and PR industry leaders. Reach him at richard.carufel@bulldogreporter.com; @BulldogReporter