Dive Brief:

• Marketing budgets as a percentage of overall revenue reached the lowest level recorded since researcher Gartner began tracking such allocations as part of its annual CMO Spend Survey. The latest findings, which were shared in an email with Marketing Dive, found budgets slipped from 11% of company revenue in 2020 to just 6.4% this year.

•  All categories are experiencing headwinds, though brands with revenue of more than $2 billion reported the lowest average marketing budget at 5.7%. No single industry achieved double-digit marketing budgets in relation to company revenue this year, according to Gartner, with travel and hospitality, manufacturing and tech product brands feeling some of the heaviest drops.  

• Consumer packaged goods fared comparatively well, securing marketing budgets at 8.3% of company revenue. Companies with revenue of under $500 million reported the highest figures with an average marketing budget of 8.6% of revenue. But the big picture suggests CMOs will need to fight harder for resources even as a pandemic recovery revitalizes ad spending in a broad sense.  

Dive Insight:

Gartner's latest CMO Spend Survey does not paint a pretty picture for marketing chiefs who may have been hopeful that a reopening would prove to be a windfall for budgets in 2021. As in the past, the research firm found CMOs have generally held rosier projections than what's actually been realized when breaking out the numbers. Gartner surveyed 400 executives holding the CMO title or other marketing leadership roles in North America, the U.K., France and Germany from March through May 2021. 

"Despite facing in-year budget cuts in 2020 due to the pandemic, most CMOs expected budgets to bounce back in 2021. This budgetary optimism was misplaced [...]," said Ewan McIntyre, co-chief of research and vice president analyst of Gartner for Marketers, in a press statement. McIntyre described the cuts as a "slow burn," where resources lost over the course of the past year have never really returned to normal. 

Continued pressure on the size of overall marketing budgets creates contrast with the larger advertising market. Global ad spending is forecast to rise 12.6% this year to reach $665 billion, according to figures released this week by WARC. That's a stark upgrade from the 6.7% growth initially projected by the firm, but one that signals a strong pandemic rebound is shaping up, with online formats leading the way.

Marketers have realigned where they're spending their money in response to trends spurred by the pandemic, and in ways that could be impacting overall budgets. Money directed to external agencies — one of the largest resource allocations for brands — has continued to decline, per Gartner. Surveyed marketing brass said that 29% of work previously handled by such third parties has moved in-house over the course of the past year, with internal client-side teams tackling bigger duties around brand strategy and innovation. Operations and brand strategy make up 11.9% and 11.3% of total marketing budgets, respectively.

Similarly, more brands have made bigger commitments to digital and direct-to-consumer channels that can be cheaper to market around compared to linear media like TV. Pure-play digital channels — including owned, paid and earned media — now command 72.2% of total marketing budgets, Gartner revealed. Digital commerce, which saw a boom in adoption as people avoided stores due to COVID-19, is carving out 12.3% of CMOs' spend this year.