Man looking towards future budgeting

5 Reasons Marketing Budgets Will Drop In 2018

7 minute read
David Roe avatar
After three years of growth recent data predicts marketing spending will slip in 2018.

Recent research from Stamford, Connecticut-based Gartner appears to suggest that the growth in marketing budgets many organizations have experienced over the past few years is stalling and that in some areas of marketing budgets will even shrink.

According to figures in the CMO Spend Survey 2017 - 2018 survey, which was released in October, marketing spending started falling back after three years of growth during this year with budgets falling from 12.1 percent of company revenue in 2016 to 11.3 percent in 2017, representing a return to 2015 levels.

Marketing Budgets Decline

Nor does Gartner expect it to get better. According to the research, which was carried out between June and August this year across 353 marketing executives in North America and UK, one third of CMOs believe their budgets will be frozen or even cut. A further 52 percent believe they will increase marginally and only 15 percent believe they will see a significant increase next year. Most of the increase will be for digital marketing budgets.

In a statement about the figures, Ewan McIntyre, research director at Gartner said that the cuts, or restraints would provide a challenge for marketers and that they will be under increasing pressure to justify marketing spend. “There is evidence that CMOs may have become distracted — either by a heavy focus on operational and tactical measures of performance, or by large, cross-functional initiatives such as customer experience (CX) programs that have yet to provide hard economic benefits,” he said.

He added that there is further evidence that CMOs are being too nearsighted to be strategic. The result is a lack of focus on the metrics that matter to CMOs and the business — how marketing activities deliver return on investment and profitability to the organization. However, not all organizations have felt the impact to the same extent. Extra-large businesses have been shielded from cuts so far, and cuts have varied across industries, with retail and manufacturing being hit the hardest.  

1.Attribution Gaps

Craig Streaman is a freelance digital marketer from Los Angeles with a variety of clients struggling with campaign budget concerns. He told CMSWire that he has noticed a significant slowdown and that from his experience the most important drag on marketing budgets is attribution gaps. Most advertisers are looking for direct ROI on their campaigns that are designed more to generate awareness than conversions. Someone who searches on their mobile device for a product before bed, follows up on their work computer the next day, and then finally converts into a sale or lead days or weeks — even months later once they decide to move forward.

“Most users are going to end up searching on the brand or product name to do more research when they are ready to buy — driving conversions on return sessions from Organic Search and Direct visits that wouldn't be possible without the initial introduction done through campaigns,” he said.

2. Misspent Budgets

Stephen Gibson, founder of PR company Vyteo agrees but adds that the problem is not just badly spent marketing budgets, but also the fact that misspent budgets result in ineffective campaigns. He pointed out, for example, that it is easy set up a Facebook ad and have it promise you a certain range of views or clicks, and at the end of the campaign the promises fail to materialize. Further, if you select the prevalent "Boost Post button" and don't put a lot of thought into who you're targeting, your campaigns won't be successful for your business.

Many online companies looking for advertising revenues can be pushy about utilizing its advertising system. Simply by setting up a business page he says, companies feel entitled to solicit for business at least once a day. Some of its messages even come across as condescending.

“Finally, ad blockers are prevalent now. The web is a nuisance to browse without one anymore. With ads being so easy to create and distribute and so many of them going to any length to get attention, people will do whatever they can to wholesale turn off the advertising noise. All of this adds up to business seeking other channels to reach their customers,” he said.

3. Marketing Competition

Stan Tan is the digital marketing manager at Sydney, Australia—based Selby's ,a marketing agency that specializes in event branding solutions with clients such as McDonald's and Mercedes-Benz. He points out that most digital marketing budgets are allocated into two channels, Google and Facebook. Google has been saturated for some time. Facebook is coming to that point now. Previously, you could have run ad campaigns on Facebook and make a healthy ROI without little to no skills (optimizing landing pages, thinking about conversion rates, A/B testing) and investment (designing ad creative, copywriter).

Learning Opportunities

The landscape, however, has become more competitive. There are bigger companies coming into the market now that can pay twice as much as the average small-to-medium businesses (SMBs) which means those SMBs have to increase their CPC (Cost-Per-Click) campaigns or CPM (Cost per thousand) to compete. “The bottom line is that there is a more competitive landscape with bigger companies coming in who can afford to pay higher CPC and CPM which ultimately drives the costs up for everyone,” he said.

4. Trackable Marketing

There is one other element that marketers need to consider before launching into digital campaigns. Robert Richardson of Las Vegas, Nevada-based Richardson Marketing, claims that a majority of the companies who have decreased their online budgets have done so because they cannot track their campaigns through to conversion. 

Digital marketing, he argues, should be one of the most trackable and accountable forms of marketing, but most companies lack the infrastructure and analytics to understand what their campaigns are doing, where their leads are going, and what type of conversion numbers are being generated. “Unfortunately, when we take on a new customer the first couple of months are often spent setting up customer management systems, analytics tracking, and systems that should have been in place before they started pouring money into digital marketing,” he said.

Not everyone is so pessimistic. Reuben Kats, a web design sales engineer at Hollywood, California-based digital marketing agency Falcon Marketing, has been involved in more than 100 Pay-Per-Click (PPC) campaigns and says that the market is set for growth over the next ten years. He went on to share that a lot of companies are investing their profits to acquire new clientele through better marketing campaigns with more focused business goals and targets. He also points out that there is no getting away from Google's AdWords. A business that doesn't know how to run an advertising campaign on AdWords shouldn't even start. 

“If someone doesn't know how to market using PCC, then it'll be a waste of money if someone uses the wrong keywords. This part of marketing is what makes or breaks the company,” he said.

5. Poor Forecasts

Returning to the Gartner survey, there is some good news, even if the survey points out that economic conditions are unlikely to improve for two years at least. The good news is almost all for digital marketers too. The survey found that two-thirds (67 percent) of CMOs plan to increase investment in digital advertising, while traditional media faces budget losses. Event marketing and partner/channel marketing will fall off or even flatline, according to the data.

Digging deeper into the findings on the digital marketing space, a number of channels will experience higher levels of investment including including websites , where 61 percent of CMOs expect to increase investment. as well as,  mobile where 59 percent expect to increase spending. CMOs also show a strong and continued commitment to social marketing, with 64 percent planning to boost budgets.

There will also be a linked growth in spending on analytics as marketers look to demonstrate the ROI of marketing projects, which offers some hope for the future. If, by using analytics, they can show the value of marketing campaigns digital, or otherwise, then it is like company executives will feel better about investing more money.