How much did marketing budgets drop during the pandemic?
The pandemic affected many aspects of our lives, including work. But did it affect marketing budgets? And if so, by how much? Here are some scary figures from Gartner’s research.
I find benchmarking my marketing spend against the average really useful — especially when I’m begging for more money.
These marketing budget stats are based on research from Gartner and their regular CMO Spend Survey. This time it covers the period of the pandemic. It makes sobering reading.
So here are the headlines…
Marketing spend in 2021 was the lowest recorded
When over 400 Chief Marketing Officers were surveyed between March-May 2020 they believed the effects of the pandemic would be short-lived (in contrast with their C-level colleagues). Most expected budgets to be cut by 5%-15%, but quickly recover.
Imagine their shock when they saw it slashed by almost 50% (see chart).
Spend reached its peak in 2016 (12.1% of revenue) and it maintained a level of between 10%-11% in the following years. Then in 2021, bang! Down to 6.4%, the lowest Gartner has recorded since it started its surveys.
Personally, the cuts are not a surprise. Marketing is always one of the first budgets to be chopped in difficult times and often the last to be restored. I think CMOs were overly optimistic with their 5%-15% figure.
Talking to my colleagues, it seems the savings have come from bringing more marketing activity in-house (less reliance on agencies) and switching from brand-awareness campaigns (that deliver benefits in the future) to lead generation (that pay the bills today).
The Gartner report seems to support the conversations I’ve had. It shows that 29% of work previously carried out by external agencies has been moved in-house.
Spend does vary according to the industry
However, the research shows there is a great deal of variation from one sector to another. Competition, profit margins and the ability of the industry to attract marketing talent will all impact an industry’s view of marketing value… and therefore, budget.
Plus, some sectors were hit harder than others during the Covid crisis. You can see from the chart that no industry was immune from the cuts.
However, it seems Consumer Products, Financial Services and (no surprise) Healthcare had the lowest cuts. The sectors where marketing got hammered were Media, Manufacturing and IT Products.
What may be surprising is the position in the middle of Travel & Hospitality. However, we have to remember that home delivery of takeaway food really took off during the pandemic — and that requires marketing.
In addition, these figures are from the USA (49%), UK (27%), France (12%), Germany (11%) and Canada (1%). Each country would have had their own way of supporting the Travel & Hospitality sector — some better than others.
Which marketing channels were hit hardest?
The simple answer is anything that wasn’t digital. While there were cutbacks across the board, it seems digital channels were the least affected. Possibly because of their strength in lead generation as well as their measurability (ROI being key during difficult times).
A whopping 72% of the average marketing budget was spent on Pure-Play Digital channels*. Compared to previous years that’s a big jump. Offline ads, partner/affiliate programs and events were all hit hard.
* Pure-Play Digital channels include website, email, mobile, digital ads, search ads, social media and SEO.
5 tips for a tight marketing budget
I always check the following 5 points when budget cuts loom.
1) Find the winners and losers
Good marketers are scientists, so spend time analysing the past performance of your channels, programmes, campaigns and strategies. What worked and what didn’t work. We all have our favourites, but this is a time to be objective.
2) Be brave and cut the under-performers
Now you have calculated ROI, you need to take a deep breath and cut the losers — even the ‘sexy’ new stuff. You have a tight budget and need to outperform your rivals.
3) Use the 5% rule
Financial advisers use a rule that you should never invest more than 5% of your money in any one fund. Good advice. Do the same with your marketing budget — spread the risk.
4) And the 10% guide
Allow yourself some money to discover new winners. I recommend that 10% of your budget should be allocated to experimentation. So, a £100,000 budget would have £10,000 assigned to experiments, and of the remaining £90,000 no more than £4,500 would be spent on a single item.
5) Imagine the money comes from your personal bank account
This is an idea I have applied since my first day in marketing. Sometimes we can be a bit cavalier when spending corporate money; it’s different when we spend our own. I’m not suggesting you should always play it safe, just pause occasionally and question your motive.
These marketing budget stats show how fragile marketing can be, and the need to be aware of how world events can have an impact. It will be interesting to see how quickly the budgets recover — or whether the current war in Ukraine and fuel crisis cuts deeper into spending.
To help control your marketing budget download my marketing Plan-on-a-Page template. You’re welcome :)
Photo by Edwin Hooper.