Digital marketing

Digital Marketing Budgets: How Can Marketers Meet Rising Growth Expectations?

Digital marketing budgets: how can marketing leaders meet rising expectations for growth?

30 second summary:

  • Digital marketing budgets as a revenue share have halved in 2021 and spending levels are unlikely to recover in 2022.
  • CMOs must assert their right in transformation programs.
  • Digital marketers can maximize spend by capitalizing on enterprise-wide investments in digital and data and focusing on valuable customer segments.

Deborah WomackAssociate Partner, Marketing Transformation at Ernst & Young LLP, offers five actions marketing leaders need to take now – plus a bonus that will help unlock investment potential through internal strategic alliances.

For CMOs and marketers who find themselves with nearly half the budget compared to 2020, getting the most out of every customer interaction while giving customers the experiences they want is the biggest challenge this year.

Falling Marketing Budgets + Growing Demands

As brands seek to recover from two years of uncertainty, marketing managers are facing some of the most severe budget cuts in years – some as high as 15% of the total marketing budget according to Gartner CMO Spend Survey. Marketing budgets as a proportion of business revenue fell from 11% in 2020 to 6.4% in 2021, their lowest point in history according to the same study.

In times of business uncertainty, marketing budgets are under pressure and scrutiny, often forcing marketing teams to scramble to adjust their plans to accommodate the reduction while delivering the revenue growth demanded. by the company. Industries that were hit hardest by 2020’s challenges saw the biggest cuts — and the least fiscal clawback in 2021. Very few saw budgets rebound to 2019 levels. Understanding why there’s a big drop marketing budget allocation will help marketers not only survive the trend, but also protect the future of marketing investment as a critical driver of value and growth.

Beyond global pressures

Beyond the obvious pressures the global economic crisis is putting on spending, several other factors are contributing to marketing budget cuts. First, portions of marketing budgets are being reinvested elsewhere in the business, such as large-scale, enterprise-wide digital transformation programs that promise to deliver everything from best-in-class customer experiences to business and commercial models. reinvented.

According to EY research in 2021:

  • Nearly half (44%) of companies said they are making good progress with their digital transformation plans and are beginning to integrate them into their business.
  • In 2022, two-thirds (66%) of companies expect to be doing well, and 17% expect their transformations to be fully integrated across the business.

Marketing needs to claim its place in digital transformation programs and in turn demonstrate, through better customer outcomes, that the organization’s investment strategy is moving in the right direction.

While a portion of marketing budgets are spent on digital transformation, the obvious companion to all digital transformation programs is data: only 4% of companies say they have a “very sophisticated” approach to leveraging customer data. according to EY research. Thus, at least a portion of traditional marketing spend is reallocated to data development projects.

Talent drain

Digital Marketing Budgets: How Can Marketers Meet Rising Growth Expectations?

It’s not just money coming out of marketing budgets. It’s also the depletion of highly skilled digital marketing talent reassigned to big digital transformation projects that are the top priority for the CEO and CIO – and an attractive career prospect for ambitious marketing executives. As marketing leaders consider shifting more strategic marketing functions in-house, managers need to think about how to effectively structure internal teams to promote cross-functional collaboration, provide the best employee experience and manage career progression opportunities. Marketing must reorganize its internal ecosystem, agencies and technology partners to gain agility, collaborate effectively with other functions and bring new skills and thinking when needed.

Increasingly, we’re seeing CMOs weaving purpose, experience and service into high-level digital marketing activities, investing heavily in transforming the customer journey through advanced analytics and funding it not from digital marketing budgets, but forming alliances across the organization. with technology and data leaders. Marketing needs to appease its own marketing spend habits by shifting attention away from creative efforts that offer little commercial value and focus on improving the overall shopping experience for customers.

Five (and a half) things CMOs need to focus on now:

1. Redirect brand and marketing strategies towards capturing long-term customer value and away from creative activities that are unlikely to generate growth
2. Analyze the entire customer buying funnel – top to bottom – to identify performance improvements that will deliver greater ROI
3. Build a business case for future marketing investments using customer LTV (lifetime value) as a key metric and linking results to business goals
4. Maximize digital marketing spend by ensuring enterprise-wide digital transformation projects also focus on marketing use cases such as real-time analytics, personalization and capabilities hyper-targeting
5. Accelerate first-party data capture at every touchpoint with customer-centric design principles guiding omnichannel communications such as nurture and lifecycle programs

Another action for marketing leadership – 5.5 on the list – is to form fundraising alliances with the CDO and CIO who can use brand and digital marketing KPIs to measure the effectiveness of their fundraising strategies. data, digital platform implementations and technology upgrades.

Conclusion

The past two years have required CMOs to constantly adapt to effectively respond to ever-changing customer experience, shopping and service expectations. One thing is certain, focusing spending only on short-term creative campaigns without understanding the long-term value they deliver is not a strong case for increasing marketing spend in the future. Forming strategic and collaborative partnerships within the C-suite maximizes and extends marketing investments and enables faster innovation and greater agility.

Essentially, marketing needs to come to the table from the start of digital transformation projects to expand its budget reach and become a beneficiary of tech, data and digital development programs.

The views expressed in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.


Deborah Womack is Associate Partner, Marketing Transformation at Ernst & Young LLP.

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