CMOs Predict Budget Growth Despite Limited ROI Gains

February 23, 2016

This article is included in these additional categories:

B2B | Business of Marketing | Marketing Budgets | Mobile Phone | Return on Investment | Social Media | Spending & Spenders | Tablet

DukeCMOSurvey-Expected-Budget-Changes-Feb2016CMOs in the US expect their marketing budgets to increase by an average of 6.9% over the next 12 months, according to the latest edition of the biannual CMO Survey [pdf] from Duke University’s Fuqua School of Business. That represents an uptick from a 5.5% increase forecast 6 months ago, and is in spite of limited proof of ROI and growth in that metric.

The study finds CMOs estimating an average increase in ROI over the prior 12 months of a modest 2.8%, with that figure unchanged from the previous survey 6 months earlier. B2C services companies reported the largest increase in ROI (of 4.2%), while B2C product companies reported the smallest increase (of just 1.8%). Those results may have a bearing on future budget growth, as B2C service companies are bullish on future budgets (predicting an above-average increase of 8%) while B2C product companies expect their budgets to be relatively flat over the next 12 months, with just 1.3% average growth.

That suggests that budget growth is in some way tied to ROI, although the results separately indicate that quantitative proof of ROI remains elusive for most marketers. Fewer than 4 in 10 (37%) said they’re able to quantitatively prove the short-term impact of their marketing spending, and even fewer (31%) said the same about proving the long-term impact of their spending. Those levels haven’t changed appreciably in the past couple of years.

DukeCMOSurvey-Measuring-Biz-Impact-Mktg-Spend-Feb2016

Nevertheless, CMOs are pushing forward with their spending in areas where ROI – whether proven or not – seems limited. For example, they remain bullish about social media spending, which currently occupies an estimated 10.6% of their budgets, but which they forecast to rise to 13.2% of budgets in the next 12 months and more than one-fifth (20.9%) of overall spend in the next 5 years. That’s despite just 11.5% saying they’ve proven the impact of social media quantitatively, and, more worrisomely, just 1 in 10 (10.2%) rating social media’s contribution to company performance as a top-2 box on a 7-point scale (where 7 is very high).

Similarly, while mobile currently captures an average 5.9% of respondents’ budgets, that share is forecast to increase to 14.6% in the next 3 years, led by B2C product (22.2% share forecast) and B2C service (20.3%) companies. However, only a fractional 2.8% of respondents rated mobile marketing’s contribution to their company’s performance as high (top-2 box), while the largest share (40.2%) said it doesn’t contribute at all to their performance.

CMOSurvey-Contribution-Mobile-Social-Company-Performance-Feb2016

(It’s worth noting that mobile’s contribution is lowest for B2B companies, who also forecast less spending on mobile than B2C companies. For a look at the potential reasons why B2B companies aren’t as enthusiastic about mobile, see MarketingCharts’ recent study, the 2015 B2B Digital Marketing Insights Report.)

Overall, budget expectations for these channels are more likely driven by shifts in overall customer behavior and general spending patterns. Once again, CMOs forecast a double-digit increase (13.2%) in digital marketing spend over the next 12 months, while at the same time predicting a 3.2% decline in traditional advertising.

About the Data: The CMO Survey is conducted online twice a year. The latest survey was fielded from January 12 to February 4, 2016. The survey had 289 respondents, of whom 95% were VP level or above.

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