Ask any company executive right now why their company is not delivering on their bottom lines, and they will tell you one thing: covid 19. Granted, covid 19 has thrown quite a humongous curveball in the economy and upset plans and predictions that may have benchmarked business in 2020.
But even before covid 19, analysts predicted tough economic times ahead, and recommended strategies that companies can put in place to mitigate. As such, one thing remains to be said of the predictions from the 2019-20 Gartner annual CMO spend survey: there were clear signs that economic difficulties will lead to more financial uncertainty in the future, hence more budgetary challenges.
The following were some of the ways that garner noted in the 2019-20 survey, about how CMOs can improve organizational results
- Have contingency plans in place to tackle economic uncertainties
- Benchmark their budgets and focus on overall budget movement and what drives budgetary changes over time. Move from budgetary creation based on comparison of current vs prior years.
- Focus on driving operational excellence in Martech spend, and planning and execution excellence
- Optimize spend for marketing agency and focus on spend models that drive performance while still maintaining strategic partnerships
Given the current state of affairs, whether companies should have been better prepared for the current crisis remains a moot point. What matters is what top company executives do next. A survey conducted by PWC among CFOs, revealed that:
- 53% of CFOs expect covid 19 to reduce company revenue and profits by up to 25%. 63% of CFOs agree that to survive, companies need to pivot, and therefore there is need to change their product offering.
- CFOs also feel that providing better remote working experiences to allow teams to continue uninterrupted would be a great way to go.
CMOs plan to cut back on TV advertising, event marketing and offline advertising. Garter recommends that in addition to budget cuts, marketing leaders should mitigate against the effects covid 19 will have on their companies by taking the following actions:
- Put together a specialized team responsible for creating a cost optimization model. Such a model should be able to adapt to the uncertainties that continue to be experienced in the business environment.
- Review short term budgets and respond with decisive action where cost correction is needed. This will ensure business continuity now and provide a cushion for the future as companies brace for more uncertainty going into 2021 and possibly 2022.
Let’s dive into the 2019-20 Gartner CMO spend survey results to better understand the top investment priorities that marketing has had to grapple with and if/how they will, or should adjust their spending priorities in the coming months.
Marketing Budgets On a Downward Trajectory
The 2019-20 Gartner research into the global marketing arena was quite insightful. One of the key findings from the report is that over the last 4 years, marketing spend had stagnated on the 11% mark for a while and was already taking a downward trajectory.
Despite this bleak outlook, Most CMOs who participated in the research noted that “the global economic outlook will have a positive impact on their business in the next 18 to 24 months”.
But how do things look now? Were the confidence levels felt by CMOs unfounded, and were they indeed “hubris” as the report noted?
To answer these questions and to help you better understand where your company should be investing its marketing funds, we will look at the findings and recommendations from the survey report.
Recommendation 1: Budgeting. Move to Activity-Based Budgeting
There is no one single way to set budgets, although agile activity-based budgeting seems to be a more preferable approach among most CMOs. In 2017, 12% of CMOs said they had to justify their spend per project. This number rose to 23% in the 2019 survey.
Recommendation 2: Smart Media Spending
Before covid 19, priorities on marketing advertising spend were as follows:
Media: A bias towards paid advertising and against search
It is clear from the survey that CMOs favor media, particularly paid media. 26% of marketing spend goes to paid advertising, as more organizations find that they cannot rely on organic traffic alone or get the full benefits of their investment from influencer marketing. Paid media spend stood at 23% during the 2018 survey. On the other hand, search advertising stood at 6.6%, which in itself wasn’t totally unexpected, considering only 10% of brands were maximizing search marketing.
Although CMOs were confident in the efficiency of digital ads and social marketing to keep their strategies going even during difficult economic times, they felt that if their investments aren’t advised by the right data, such ads wouldn’t optimally target audiences during their purchase journey. Building, delivering and optimizing digital advertising campaigns requires expertise, something that most CMOs admit they have a difficult time finding.
Lack of confidence in offline advertising
Note that although a significant investment still went in offline advertising, CMOs were skeptical about its continued support when dealing with economic hardships. Part of the dissatisfaction with offline advertising is that its efficacy isn’t as easy to measure as digital channels.
However, 16% felt that investing in offline channels such as print, radio and out of home is important even during economic hardships.
How Can You Make Your Media Investment Pay Off?
For media investment to yield better results, you should do the following going forward:
- Budgets should be insight led and objective based. Marketing shouldn’t base investment on assumptions of a channel’s efficacy but should instead invest in different digital media channels based on their capability to deliver on goals. Investment should also be advised by your customers’ journey.
- Invest in channels that deliver the reach you want, and give you quality leads at the best cost structure possible
- Constantly assess your marketing mix to ensure it is still best placed to support your business objectives
Recommendation 3: Martech. To Buy or Not To Buy?
From the 2019 survey, it may appear as though martech investment has waned. This, however, is not the case. Gartner noted that the yo-yo effect noted in martech spend over the years is attributed to front-loaded costs on new technologies, followed by a period maintenance costs, which tend to be lower.
There are however concerns when it comes to adoption of new technologies within organizations. 24% of study respondents identified three areas of concern when it comes to managing Martech:
The 2018 Gartner research showed that Martech in most companies was still underutilized and operates at only 61% capacity. This is still the case in the 2019 survey, with 25% of CMOs attributing this to insufficient budget, lack of skills/ capabilities, and being under resourced. Low adoption and use of Martech interferes with acquiring and retaining loyal customers.
Some of the recommendations given for improved martech strategy, its adoption and use, include:
Hiring skilled people
Customer demands are ever changing, and you need people with the skills to run technology stacks that help to respond fast to those needs.
Upgrade your tech stack
Marketing leaders should have a plan to identify and fill skills gaps, as well as the willingness to let go of platforms that are old or don’t add much value. Right now, remote work has become the MO for most companies. In addition, strengthening digital commerce is now seen as key to remaining competitive. For those reasons, what you should be spending on right now, are technologies that empower your marketing and sales units to effectively manage pipeline remotely.
Invest in analytics and insights to drive performance
Whereas analytics and insights were low on the list of marketing capabilities, the tune has changed with the 2019 survey. Marketers now view this function as strategic to their operations.
For most marketers, it now goes without say that analytics and insights are strategically important to healthy marketing performance. CMOs are focused on data led marketing and are strongly investing in marketing analytics and competitive insights to maximize effectiveness of strategy delivery.
But even as much as the biggest budget allocation goes to marketing analytics, there is a mismatch in investment vs output, due to underutilization of talent within companies. Data scientists find themselves doing basic or operational tasks. As investment is results-based, this will jeopardize future investment into data, if CMOs cannot justify that data-led marketing is having any impact.
Recommendation 4: Success Measurement. Focus On the Right Metrics
When asked to identify metrics that drive decisions in their organization, CMOs identified the following:
- Brand awareness and brand health. Brand awareness and brand health are considered as the first and second top brand metrics by 72% of CMOs and 64% of CMOs respectively
- ROI and market share. 70% of CMOs consider ROI a top performance metric. 65% maintained that market share is the second most important performance and efficiency metric.
- 67% consider conversion rate as the most critical conversion metric.
- When it comes to building customer loyalty, Customer satisfaction ranked highest at 71%, while customer lifetime value ranked second at 66%
The success measures that an organization chooses to focus on tell us “what is valued and socialized within the marketing organization”. Defining marketing success requires looking beyond defined metrics and actually socializing teams to do the same.
Marketing should focus on marketing insights and scorecards that capture revenue in addition to showing the value created in the long term, in areas such as process improvement, innovation and development of new ideas.
Additionally, decide on what makes sense to your company to include in ROI calculations, so as to reflect the true value of marketing’s contribution now and in the long term
As such, the metrics you choose need to reflect a balanced view of performance. The full value of marketing’s contribution to the company. Some metrics such as brand awareness are important, but do not fully demonstrate the value generated from investing in marketing activities
On the other hand, performance metrics such as ROI may seem reassuring, but can also be deceptive if teams do not take into account their organization’s unique circumstances.
Lastly: Outsource. An Inhouse Approach May Cost More In The End
We have pointed out above that lack of skills is a key area of concern for most marketing executives. Note that the cost of upskilling your staff to handle all marketing-related tasks can be quite significant. This remains one of the main reasons why outsourcing marketing to agencies still commands a significant portion of marketing budgets.
Martech is important. But you may not have the budget to invest extensively in new technology. As marketing agencies are already equipped with the right technology to take your business to the next level, outsourcing will also eliminate the need to invest in marketing technologies that you may not be prepared to invest in.