Although the majority of C-suite executives are showing confidence in marketing’s ability to drive growth this year, their confidence isn’t necessarily reflected in marketing budgets. In fact, a report [download page] from Gartner reveals that the share of company revenues allocated to marketing expense budgets has fallen drastically this year.
The survey of 400 marketing leaders across 5 global markets found that marketing budgets as a portion of revenue have fallen to 6.4% this year. To put this decline in greater perspective, up until this year, the lowest proportion of total revenue allocated to marketing budgets, during the time Gartner has conducted this survey, was seen in 2014 when it stood at an average of 10.2%. And, even in 2020, when companies were struggling to cope with a global pandemic, 11% of revenue was allocated to marketing budgets.
Budget Allocation by Industry
Of the nine industries analyzed, not one escaped the sting of cuts in budget as a portion of revenue. Manufacturing experienced the biggest percentage-point drop in revenue allocated to marketing. In 2020, Manufacturing marketing budgets were allocated an average of 12.7% of revenue — the largest share of revenue across the nine industries examined. This year, however, only 5.8% of revenue are estimated to be allocated to marketing budgets for the industry.
Similarly, Tech Products marketers have seen their budgets as a proportion of company revenue drop from 11.4% in 2020 to 5% this year, while 5.8% of Media companies revenue is allocated to marketing budgets, down from 12% in 2020.
On the other hand, Consumer Products appears to be the least affected by the blanket decline in the share of revenue allocated to marketing budgets, dropping from 10.8% in 2020 to 8.3% in 2021. Likewise, Healthcare marketing budgets as a proportion of company revenue declined to 7.2% this year after standing at 9.9% in 2020.
Digital Channels Account for Majority of Budget
If the events of last year have taught marketers anything, it’s the growing importance and benefits of digital marketing. Indeed, being able to reach prospects and customers online when many offline channels were curtailed was a likely reason why earlier research from Gartner found that a majority of both B2B and B2C marketers expected to increase their spending on most digital channels this year.
As a result, marketing leaders are allocating nearly three-quarters (72.2%) of their marketing budgets to pure-play digital channels, with social media (11.3%) and digital advertising (11.2%) accounting for the largest shares. Marketers are also allocating a fair portion of their budget to their websites (10.1%) and to SEO (10.5%), while email, mobile and paid search ads will each take up 9.7% of marketing budgets.
The remaining share of marketing budgets is being allocated to non-digital channels including offline ads (9.9%), partners (9.4%) and events (8.4%).
Channel Reallocation Not Driven by Cost Reduction
Despite the drastically reduced share of company revenue being allocated to marketing budgets this year, only about one-quarter (24%) of marketing leaders say that they would prioritize channel reallocation to reduce costs. Instead, nearly half (47%) say that being able to better meet the pace of change brought on by advances in digital technology is what is driving channel reallocation this year, followed by the desire to improve brand awareness (40%) and being able to gather data-driven insights from digital channels (39%).
Find the full report here.
About the Data: Findings are based on a survey of 400 marketing leaders across the US, Canada, France, Germany and the UK, 81% of whom work at organizations with at least $1 billion in revenue.