Marketing Executives Embrace the 'Age of Efficiency' with Budget Cuts Post-Pandemic

Decline in CMO Spending Power

CMO spending power is on the decline, as revealed by new research from Gartner. This year, marketing budgets account for 7.7% of total company revenue, a drop from 9.1% in 2023. These numbers are also lower than the pre-pandemic average of 11%.

Investments in marketing technology, labor, and agencies by CMOs are decreasing, while spending on paid media is increasing, making up 27.9% of 2024 budgets. Within paid media, digital advertising accounts for the majority at 57.1%.

With CMOs facing resource constraints and urgent growth goals, artificial intelligence (AI) has become a valuable solution. Marketers have identified time and cost efficiency as key advantages of using generative AI, with one-third highlighting these benefits in terms of return on investment.

Article Insight:

The advertising market is showing signs of improvement this year, especially with upcoming events like the Summer Olympics set to boost momentum. Despite this positive trend, Chief Marketing Officer (CMO) budgets remain low and are currently below the pre-pandemic averages seen in the past four years.

Marketing budget allocations in relation to company revenue dropped to 6.4% in 2021, then increased to 9.5% in 2022. However, there has been a continuous decline since then. According to a survey conducted by Gartner, 64% of marketing leaders feel they do not have enough resources to effectively implement their strategies for 2024. The survey included nearly 400 CMOs or equivalent roles from organizations with a median annual revenue of over $5.3 billion.

Ewan McIntyre, vice president analyst and chief of research for Gartner's Marketing Practice, stated that CMOs are currently facing a period of limited resources. Before the pandemic, average marketing budgets were 11% of overall revenue in the four years leading up to it. In the four years following the pandemic, this percentage has decreased to a low 8.2%.

Many CMOs are banking on generative AI to boost productivity, but the technology is still early in development and faces legal and ethical challenges. This could temper some of the hype seen since the launch of ChatGPT in November 2022.

Marketers are now prioritizing paid media as they look to maximize their budgets. Paid media now makes up 27.9% of 2024 budgets, with digital being the largest allocation at 57.1%. Other channels like search, social, and digital display follow behind. Video and streaming are seen as the most impactful digital channels, even though they rank fourth in terms of spending.

Meanwhile, CMOs have noticed a decrease in their control over marketing technology, which now makes up only 23.8% of budgets this year, the lowest in ten years.

According to McIntyre, this decline in martech spending does not mean that CMOs are less interested in technology. Instead, it shows that other leaders in the company, like those in IT, are gaining more authority over martech decisions.

Editor's P/S:

The decline in CMO spending power is a concerning trend that may hinder marketing effectiveness. With budgets shrinking and resource constraints increasing, CMOs are facing challenges in implementing their strategies. The shift towards paid media and the decrease in martech spending indicate a focus on short-term gains rather than long-term brand building.

AI, while promising, is still in its nascent stages and faces legal and ethical hurdles. It remains to be seen how effectively generative AI can address the time and cost constraints faced by marketers. CMOs need to carefully evaluate the potential benefits and risks of AI before making significant investments. By balancing short-term priorities with long-term vision, CMOs can navigate these challenges and drive marketing success in the face of declining budgets.