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Put your money where your marketing is

It wasn’t all that long ago that marketing experts were telling their clients that the Great Recession created great opportunities for companies brave enough to increase their investments in marketing.

So, why are companies doing exactly the opposite now that the economy is well into its recovery? The answer, it seems, is found in the shift to digital-marketing strategies.

Academic research dating back to the 1920s shows that companies which muscle-up advertising costs during recessionary times post sales gains when the economy bounces back. It makes sense, then, that marketing dollars stretch further when there’s less competition for advertising venues and less noise in the marketplace.

Gartner’s annual marketing survey found that marketing budgets for 2017 are expected to increase, compared to 2016. Chief marketing officers surveyed by Gartner said their organizations expected to invest 12 percent of their respective company revenues in marketing during 2017, up from 11 percent this year. (The full study is here; a subscription is required.)

It’s worth remembering that we’re eight years into the economic recovery. While the economy’s growth hasn’t been great, it’s been on a slow-and-steady upward path for a long time.

Tech spending

When Gartner’s analysts dug a little deeper into the survey results, they found that spending on technology was driving much of the increase in marketing budgets. Next year, an average of 27 percent of marketing budgets will be spent on technology, the survey estimated.

There are two really remarkable things about that figure:

First, it means that marketers will be spending more on technology than they spend on paid media, which accounts for 22 percent of their budgets. In fact, the spending on technology will rival the 28 percent that marketers budget for their staffs.

Second, the projected budget for marketing technology expenses means that marketing departments are spending almost as much on technology as their organization’s chief information officers. Another way of looking at the amount that marketers budget for technology is that it amounts to 3.24 percent of their organizations’ overall revenues. CIO spending on technology, meanwhile, averages 3.4 percent of revenues.

“The CMO now has ownership, influence and responsibility on moving the entire organization forward,” Troy Scarlott, VP of marketing and advertising at YapStone, said in an email interview. “The CMO and [his/her] respective marketing spend can be used to expand the go-to market tool box by sharing marketing dollars with functional stakeholders, [from technology to product, and from sales to data] on programs with organizational benefits.”

Gartner also concluded that chief marketing officers these days are taking on a wider range of responsibilities. At least 30 percent of the organizations responding to the survey revealed that their chief marketing officer now had some responsibilities for IT, customer experience or some aspects of sales.

It’s not surprising that larger budgets would follow larger responsibilities. The growth in budgets is more pronounced for chief marketing officers who take direct responsibility for their organizations’ profitability.


There are a couple of important takeaways here:

First, when marketing departments take on greater responsibility, including responsibility for the P&L, department leaders will be held accountable. Marketers who fail to deliver quantifiable results face greater risks than they did in the past.

Scarlott added that with an ever-increasing marketing budget, today’s CMO is face-to-face with Spiderman’s catch phrase — “With great power comes great responsibility.” Scarlott recommends that CMOs and marketing leaders take a proverbial step back and allocate marketing dollars to shared programs and initiatives that will contribute to the overall growth of the organization.

Second, the lion’s share of budget growth going to technology demands exceptional care and expertise. Because technology amounts to such a large piece of marketing budgets, failure to deliver on the promises of technology quickly can become disastrous.

To deliver on the promise of technology and remain accountable for the spending on technology, the smartest marketing executives will be those who surround themselves with staff members, consultants and providers of marketing services who have proven records of success.

The risks are simply too great these days for anything less than nimble, first-in-class digital conception and delivery.

No one can predict with any certainty how long this economic expansion will last. But it’s certain that marketing executives who focus on accountability and execution today will be in the best position to weather any economic storms that arise in the future.

source: Entrepreneur