Five Impacts of CMO Budget Cuts – Gartner 2021 CMO Spend Survey

Five Impacts of CMO Budget Cuts – Gartner 2021 CMO Spend Survey

In CMO/Marketing by Tom PickLeave a Comment

CMOs are reporting that marketing budgets are being slashed. Here’s what that means, and practical ideas that go beyond the bad news to how B2B marketers to adapt.

According to Gartner’s annual CMO Spend Survey, as reported by Laurie Sullivan in MediaPost, “Marketing budgets as a percentage of revenue fell to their lowest level in recent history…Marketing budgets as a proportion of company revenue fell from 11% in 2020 to 6.4% in 2021, their lowest point in the history of Gartner’s CMO Spend Survey.”

As bad as that news is, the situation isn’t entirely gloom and doom. Most CMOs expect budgets to increase modestly this year after the deep cuts during the pandemic. And as the article points out, “It’s not a secret that marketing budgets have always been the first of the enterprise budgets to be cut, and the last to be restored.”

Here are five likely impacts of those budget cuts. But first…

A Brief Rant

In the famous (though too often unheeded) words of Peter Drucker, “the business enterprise has two—and only two—basic functions: marketing and innovation.”

Yet as businesses have found themselves awash in cash over the past year—due to combination of government aid, a milder than expected slowdown in consumer spending, rising valuations, low interest rates, and tax cuts—far too many have spent that cash on stock buybacks rather than Drucker’s two basic functions.

It’s also been well and repeatedly documented that “advertisers that maintained or grew their ad spending increased sales and market share during the recession and afterwards.” In other words, companies that maintain or increase marketing spend, counter to the trend reported by Gartner, are likely to gain market share at the expense of the budget cutters.

But such folly will likely continue among enterprises until boards of directors shed their excessive focus on short-term returns—or more forward-thinking competitors each their lunch.

Five Impacts of Budget Cuts (and How Marketers Can Respond)

Here’s how those budget cuts are likely to impact five specific marketing budget line items, and how B2B marketers can shift tactics to get the most out of their remaining budget dollars.

Live Events Won’t Roar Back

As noted in research previously reported here, pre-pandemic, in-person events (conferences, expos, trade shows) were frequently the largest single line item in B2B marketing budgets. Though expensive, the cost was justified by the effectiveness of live events for both brand building and lead generation.

There was an expectation that once the fear of COVID and government-imposed lockdowns were behind us, live events would bounce back strongly. But in the face of slashed budgets, live event spending will have to take a hit. Most CMOs will still utilize this channel, but will be highly selective about the events on which to spend their constrained funds.

Of course, that may mean increased attention and greater results for the vendors wise enough to maintain or increase their live event budgets coming out of the pandemic.

Virtual Events Will Play a Bigger Role

Prior to the COVID shutdown, online events were primarily webinars; an attendee experience that hadn’t changed a whole lot (other than the video and audio quality improving) in two decades.

With events and meetings forced to go virtual by the pandemic, there was an explosion of event tech innovation, as well as newfound appreciation for some of the more creative virtual event platforms on the market.

The virtual event technology landscape today includes tools focused on online meetings (Google Meet, Livestorm); immersive 3D virtual event worlds (AllSeated exVo, VII Events); and highly engaging events (Shindig) with video chat networking that resembles in-person gatherings.

Not only have the tools improved, but so have the virtual event planning and production processes within most organizations. Companies realize they can now produce compelling, engaging online events that go way beyond traditional webinars; that they can save a lot of money by shifting some events from live to online; and that they can reach a much larger audience with virtual or hybrid events than with in-person-only gatherings.

What’s more, people have grown accustomed to not merely attending but actively participating in online events. Yes, there is an understandable urge, as distancing and mask restrictions fall away, to return to large in-person happenings. But not every event needs to be attended live, and with the improvements made to the virtual event experience over the past 18 months, many attendees will happy to consume the content and do the networking while skipping the travel.

Content Marketing Will Get Smarter

The biggest line item in most B2B marketing budgets, after live events, is usually content marketing. High-quality content is expensive to produce, while cheap content isn’t worth any price.

Given the leading role that organic search and social media play in the lead generation process for most B2B vendors, cutting the budget for content marketing is a really bad idea. Smart CMOs will, instead, try to get more mileage out of existing content creation efforts through repurposing and more widespread amplification.

Online Advertising Will Take a Hit

While it’s a clear and attention-getting exaggeration to say that 100% of digital ad spend is wasted, companies are taking a hard look at this spending and if cuts must be made somewhere in the marketing budget, this area will likely be an attractive target.

Search advertising is ideal for catching the attention of buyers exactly when they are looking, but the targeting is terrible. The result is a lot of clicks and conversions, but unfortunately also a lot of low-quality leads for sales reps to follow up with.

Social media advertising in contrast, particularly on networks like LinkedIn and Facebook, offer precise targeting. But though you are getting in front of the right people, you aren’t necessarily reaching them in the ideal time and place.

Few organizations will cut online ad spend to zero, but many (most?) will focus efforts more granularly on specialty publication sites and vertical content aggregation sites like B2B Marketing Zone and Event Pro Update. Some online ad dollars may also be shifted to areas like PR and influencer marketing.

Online Commerce Will Lock in Gains

A final observation from the MediaPost article was that, “CMOs have prioritized investment in the programs and capabilities that fuel digital commerce success.”

This is certainly true in the consumer marketing space. Amazon and other online shopping sites saw huge growth during the pandemic, as did restaurant take-out and delivery orders, even from establishments that had been dine-in only prior to COVID.

But B2B vendors have moved more sales online as well. With frequent flyer sales reps grounded and on-site implementation projects moved to Zoom calls during the pandemic, B2B vendors adjusted by expanding and improving the quality of their online operations, from top-of-funnel marketing content through sales transactions and customer service.

With Millennials and Gen Z now accounting for more than 60% of B2B buyers, there is also an increasing buyer preference for online commerce in B2B sales.

Wrapping It Up

The deep cuts made to marketing budgets over the past 18 months have been painful, but fortunately won’t be permanent. As pent-up demand is met and supply chains return to more normal functioning, even the most short-sighted corporate leaders will realize that cutting the percentage of total revenue devoted to marketing was daft.

As budgets begin to expand again, investments will increase in branding, live events, content marketing, and online commerce.

In the meantime, efforts will most likely shift to online events and maximizing short-term lead generation programs.

The original version of this article was first published on V3Broadsuite.