Why Marketing Budgets Are Going Up!
- Marketing budgets have increased from 6.4% to 9.5% of company revenue in 2022, recovering from historic lows in 20211.
- CMOs are optimistic about the economic outlook and the impact of marketing spending on business performance1.
- Marketing strategies are shifting from digital-first to hybrid multichannel, with social advertising, paid search, and digital display leading the online channels1.
- Marketing leaders need to build the business case for their marketing budgets based on alignment with business priorities, partnership with the CFO, and measurement of long-term outcomes2.
- Azureye Media is a creative agency that can help you elevate your brand with expert marketing and cinematic content, using high-end tools, brand strategies, and remarkable digital content3.
The State of Marketing Budgets in 2022
Marketing budgets are a reflection of how much businesses value and invest in marketing as a driver of growth and value. According to the Gartner 2022 CMO Spend and Strategy Survey1, marketing budgets have recovered somewhat from the record lows in 2021, when they dropped to 6.4% of company revenue due to the pandemic and economic downturn. In 2022, the average marketing spend increased to 9.5% of company revenue across almost all industries, indicating a renewed confidence and optimism among CMOs.
However, this recovery is not uniform or complete. Some industries, such as financial services, travel and hospitality, and tech products, have seen significant increases in their marketing budgets, while others, such as consumer goods, have experienced slight decreases. Moreover, marketing budgets still lag behind the prepandemic levels, which averaged 10.9% of company revenue between 2018 and 20201. Therefore, marketing leaders still face challenges and pressures to justify and optimize their marketing spending in the face of uncertainty and volatility.
The Reasons Behind the Increase in Marketing Budgets
What are the factors that are driving the increase in marketing budgets in 2022? According to the CMO Survey1, there are several reasons why CMOs are optimistic and bullish about their marketing spending:
- Economic outlook: CMOs expect the economy to improve in 2022, with 65% of them reporting a positive or very positive outlook, compared to 35% in 2021. This optimism is also reflected in their expectations for their own company’s revenue growth, which is projected to be 9.7% in 2022, up from 6.6% in 20211.
- Marketing impact: CMOs believe that marketing spending has a positive impact on business performance, both in the short term and the long term. They report that marketing spending contributes to 19.4% of sales revenue and 18.6% of customer lifetime value on average1. They also report that marketing spending has a positive effect on brand awareness, customer satisfaction, customer retention, and customer acquisition1.
- Marketing channels: CMOs are shifting their marketing strategies from digital-first to hybrid multichannel, as customer journeys have recalibrated after the pandemic. Online channels still account for the largest share of marketing budgets, with 56% of the total spending, but offline channels have gained more weight, with 44% of the total spending1. Among the online channels, social advertising, paid search, and digital display are the top three, accounting for 18%, 15%, and 14% of the online spending, respectively1. These channels offer high targeting, scalability, and measurability for marketers.
The Challenges and Opportunities for Marketing Leaders
While marketing budgets are increasing, marketing leaders still face challenges and opportunities to make the most of their marketing spending and to demonstrate their value to the business. According to the Harvard Business Review2, marketing leaders need to build the business case for their marketing budgets based on the following actions:
- Alignment with business priorities and strategies: Marketing leaders need to show how their marketing spending aligns with and supports the overall business goals and strategies. They need to identify the key drivers of growth and value for the business, such as market leadership, customer loyalty, or innovation, and how marketing can contribute to them. They also need to use relevant metrics and indicators to track and communicate their progress and impact.
- Partnership with the CFO: Marketing leaders need to build a strong relationship and collaboration with the CFO and other financially driven peers. They need to understand the CFO’s perspective and expectations, and to provide clear and consistent information and evidence to support their marketing spending. They also need to involve the CFO in the planning and decision-making process, and to seek their feedback and input.
- Measurement of long-term outcomes: Marketing leaders need to balance the short-term and long-term effects of their marketing spending, and to measure and report both. They need to avoid focusing only on the immediate sales revenue, which may neglect the longer-term efforts such as brand building, customer relationship, and innovation. They also need to use a mix of quantitative and qualitative methods, such as surveys, experiments, and case studies, to capture the full range of marketing outcomes.
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