CMOs have many choices for how they spend their digital marketing budget. In this installment of our “Challenges CMOs Face” blog series, we’ll discuss the challenge of determining what’s most important in a marketing budget, and how a digital marketing strategy roadmap can help set the right priorities.
In launching The 26th edition of the CMO Survey, the organization recognized upfront “the digital, social, and political upheaval the [marketing] field, and the entire world has experienced.”
This year’s survey took input from 356 respondents, 64.6% of which were B2B firms with 94.5% positioned at VP-level or above, examining how CMOs will spend their budgets.
In the same way the US economy had a sharp and swift decline, followed by a reflation-driven rebound, Marketer optimism about the economy has followed a similar V-shaped trajectory; with a notable refocus on the future.
Marketer sentiment on the economy, when assessed in June 2020, was the lowest surveyed in the history of the survey at the height of uncertainty about the pandemic. However, by February 2021, buoyed by the Covid-19 vaccine and other factors, Marketer optimism rebounded 7x to nearly pre-pandemic levels.
CMOs can choose to spend their digital marketing budgets in several different ways. It might be tempting to invest in the flashiest new technologies and services or launch an exciting new idea for a campaign; in the end, it’s the CMO’s responsibility to plan the right spend. So how do CMOs determine what is most important?
Marketing Forecasts
A whopping 72.2% noted the increased importance of marketing to the organization. In this latest edition, marketing budgets as a percentage of firm revenue at 13.2% was the highest in survey history.
In times of uncertainty, the CMO’s responsibility to plan the right spend, to be as strategic as possible in every element of this decision-making process is even more complicated, and the need to hit the target matters more than ever.
So how do CMOs determine what is really most important?
By February 2021, pandemic prudence showed significantly decreased spending, with the expectation of a significant rebound over the next 12 months. Marketers remained focused on market penetration, building brand and client retention in the pandemic year, with “Consensus across sectors and industries shows all customers demand a “strong customer experience,” catapulting it into the #1 priority”.
All the same, Marketers recognized the need to return to more aggressive goal planning in the near future with a notable increase in focus on acquiring new customers and improving Marketing ROI.
An organization’s top resource for demand strongly influences technical and strategic adoption. It’s no coincidence that as customer’s placed increased value on digital experiences, Internet sales increased 43.7% over pre-pandemic levels and achieved their highest portion of overall sales in survey history. The CMO Survey showed a 70% increase in internet sales for B2C companies, with products seeing 32.1% of total sales generated from internet orders and B2C services garnering 26.8% of sales through the internet.
When we reviewed the CMO Survey in 2018, Marketers were focused on the increased importance of analytics to the functions of the business, in terms of measuring marketing impact and performance, as well as using this knowledge to further refine budgeting and placement.
In 2018, three key survey predictions included:
- Marketing spend on analytics is expected to increase by more than 200% over the next 3 years.
- Marketing analytics will play a larger role in how overall company performance is measured.
- More firms are using analytics tools to measure marketing impact.
Even though CMOs predicted more use of marketing analytics to impact decision-making, in 2018, most firms reported they lacked the metrics needed to demonstrate the impact of their marketing spending. The challenges of the pandemic brought the tremendous value of these resources to the forefront.
In February, 48.8% of firms were able to show, quantitatively, the long-term impact of marketing spend on the business. Critical, as marketing budget as a percentage of company revenue has steadily grown since 2018, to 13.8% the highest point in survey history, and more than half of firms surveyed reported investing in data analytics or marketing technologies in the 12 months prior.
Harnessing the power and promise of AI and Machine Learning is the analytics challenge organizations are facing today. 20.4% of firms reported investing in the technology to improve digital marketing performance, achieving a” ~10% increase in use year over year since 2018” but software alone is not the solution. Nearly half of Marketers were unable to show an influence of this investment on their ability to devote time to non-routine, and more strategic projects.
Clear analytics, properly tailored to your unique goals, and the resources to analyze and activate based on the insights developed from those analytics, can really help brands save money and make the most of money spent.
Here’s why:
Marketing analytics give clear direction. Whether it’s increasing customer base, bolstering a specific product, increasing positive customer sentiment (or a mix of all of the above and more), marketing analytics show where the problems are, what you need to do next, and whether or not you’re doing it well.
Marketing analytics help you keep up with industry trends. Obviously, you don’t want to copy your competition, but you do need to keep up with what they’re doing. The right analytics will help you see what’s working for other firms, which you can then adapt using your own ideas.
Analytics is also key in understanding the value of marketing investment.
At first, it might seem counterproductive to spend more on marketing analytics to reign in your marketing budget. At Tegrita, many clients ask us how to determine where to spend more of their budget – whether in new technology, campaigns, or in analytics.
We often suggest investing in analytics.
While nearly half of companies reported using quantitative metrics to demonstrate the long-term impact of marketing, the desire to innovate and improve the ability to measure impact has not changed; however, the actual adoption of most advanced options available today in the Marketer’s toolkit, AI and Machine Learning, is still growing slowly, with only a 21% increase among the surveyed population over the past 3 years.
Marketers recognized the value of digital marketing, which saw a significant increase in spend and attention over the pandemic. 32% reported a significant degree of contribution to their company’s performance. While marketing budgets shrank, overall digital spend of that budget increased 11.5%.
When it came to return on marketing investment, considering marketing performance, Marketers reported 17.8% loss in sales revenue in June 2020, during the early months of the pandemic.
By February 2021, Marketers reported a gain of 0.3% over the last year—essentially flat for the year. Meanwhile, Marketers reported a 14.7% loss in profits in June 2020 and reported a 2.6% gain for the year.
Customer demand for digital experiences place Marketers at the forefront of consumer awareness, engagement, and thus, knowledge. This strengthens the Marketer’s opportunity to deliver strategic direction and growth.
The ability to fine tune messaging, targeting, and intensely study efficacy, are the hallmark benefits of digital channel investment.
For Marketers to reach the increased budgets projected in 2018, and again in this year’s survey, the hard work of aligning to sales and delivery teams has been done. In the same way, brands that lead investment in digital resources and experiences were better prepared to meet the global pandemic. Those brands that can harness the deeper analytics resources and strategically place investments in the channels most profitable for them will win.