With the fourth quarter of 2019 now underway, many companies have already started developing their marketing plans for 2020. A major aspect of the planning process will be setting the overall marketing budget for next year and allocating the budget across marketing channels, tactics and other spending areas.
Ideally, marketing procurement professionals will be involved in the planning process and to participate effectively they will need to have a solid understanding of current marketing trends, including those relating to marketing spending.
Three recent research studies provide important insights about how marketers have been spending their budget and where spending may be headed in 2020.
• The CMO Survey (August 2019) by Duke University’s Fuqua School of Business, the American Marketing Association and Deloitte
• The Annual CMO Spend Survey 2019-2020 (October 2019) by Gartner, Inc.
• Martech: 2020 and Beyond (October 2019) by WARC and BDO (with interviews by the University of Bristol)
Collectively, these studies identify three macro spending trends that marketing procurement professionals need to keep in mind for 2020.
Marketing Budgets
The research indicates that marketing budgets in 2019 have been relatively healthy, and marketers are generally optimistic about the prospects for marketing spending in 2020. The CMO Survey found that current (2019) marketing budgets, on average, represent 9.8% of company revenues, up from 7.3% in the August 2018 edition of the survey. On average, respondents expect their marketing budget to increase by 8.7% in the 12 months following the survey. While this doesn’t cover all of 2020, it indicates that marketers expect budgets to grow during the first part of next year.
Gartner’s CMO spend survey found that 2019 marketing budgets will average 10.9% of company revenues, down from 11.2% in 2018. Gartner’s survey also found that most CMOs are confident about budget growth in 2020. Sixty-one percent of the respondents expect their marketing budget to increase next year.
Key Procurement Takeaway – Most marketers are naturally optimistic, and therefore the expectations for budget increases next year may be a little overdone. In its survey report, Gartner observed that many economists have noted that global economic growth is slowing and is likely to remain slow in 2020. So, marketing procurement professionals should prepare for some level of marketing budget uncertainty in the coming year.
Technology Spending Remains Robust
Marketing has become increasingly dependent on technology over the past several years, and that is not likely to change in 2020. Therefore, spending on marketing technology is likely to remain robust next year.
Gartner’s CMO spend survey found that on average, marketers are spending 26% of their total budget on technology. To put this in perspective, the survey indicates that on average, marketers are spending as much on technology as they are on media, and they are spending more on technology than they spend with agencies (26% vs. 22%)
In the WARC/BDO survey, respondents from North American companies reported spending 30% of their 2019 marketing budget on technology.
Key Procurement Takeaway – For most of its history, much of the conversation about marketing procurement has focused on its role in sourcing agency services and managing agency relationships. This is understandable because in many larger enterprises, agencies have traditionally represented one of the largest components of external marketing spend. Over the past few years, however, spending on marketing technology solutions has grown to rival agency spending in importance. Therefore, if they haven’t already done so, marketing procurement professionals will need to become proficient at sourcing technology solutions, particularly cloud-based SaaS solutions.
Social/Mobile Still on a Roll
Spending on social media and mobile marketing is likely to continue growing in 2020. The CMO Survey found that on average, marketers are currently spending 11.9% of their total budget on social media marketing, and survey respondents expect that percentage to increase to 15.3% of the budget over the 12 months following the survey.
According to The CMO Survey, spending on social media has grown steadily since 2009 even though survey respondents have not believed that it makes a significant impact on company performance. Since 2016, the survey has asked participants to rate the contribution of social media marketing to company performance using a seven-point scale, where 1 = “not at all,” and 7 = “very highly.” In the eight surveys conducted over that four-year period, the average rating given by respondents has ranged from 3.1 to 3.4.
Spending on mobile marketing exhibits a similar growth trajectory. The CMO Survey found that on average, marketers are currently devoting 12.8% of their total budget to mobile marketing, and survey respondents expect that percentage to grow to 21.8% of the budget over the five years following the survey.
Key Procurement Takeaway – Marketers are firmly committed to both social media and mobile marketing, and that commitment is likely to remain firm in 2020. Over the longer term, mobile marketing could become more important than social media marketing. Recent research by the New York chapter of the American Marketing Association indicates that U.S. marketers may be over-investing in social media because the use of some social networks appears poised to stall or decline.
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