Brexit, North Korea and US hurricanes dampen corporate marketing budgets

Growth in corporate marketing budgets has stalled after continued increases over recent years, according to fresh industry research.

A study by global research and analysis firm Gartner found that marketing budgets hit a plateau in 2017 after three years of growth, with budgets falling from 12.1% of company revenue in 2016 to 11.3% in 2017, representing a return to 2015 levels.

Most of the 353 senior marketing executives Gartner interviewed – at companies with more than $250m (£189.6m) in annual revenue in North America and the UK - have modest expectations in 2018, the research firm said.

Only 15% of chief marketing officers (CMOs) it surveyed said they expect a significant increase in their budgets; 52% expect a slight increase, while one-third expect their budgets will be cut or frozen.

"While the descent is not yet steep, it still poses difficult questions for chief marketing officers," said Ewan McIntyre, research director at Gartner.

"Previous budget increases have come with weighty expectations, some of which have yet to be met. The time has come for marketing to show its financial management credentials, proving it can deal with financial constraints, assume accountability for business performance, build budgets based on future returns rather than past assumptions, and grow the business while making hard choices," he added.

The research firm noted that 2017 has been a year of significant macro-environmental upheaval, in terms of both global politics and natural disasters — North Korea, Brexit and hurricanes Harvey, Irma and Maria, for example.

Marketing is not immune to the business impact that stems from such incidents. There is also 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) programmes that have yet to provide hard economic benefits.

"The risk is that CMOs are either being too near-sighted to be strategic or too visionary to deliver against marketing's objectives. 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 organisation," McIntyre said further.

However, Gartner found that two-thirds (67%) of CMOs plan to increase investment in digital advertising, while traditional media faces budget losses. More than half of CMOs expect their investments in event marketing and partner/channel marketing to fall or flat-line, with 63% of marketers stating they expect flat growth or cuts in offline advertising investment.

At the same time, investments are growing across a range of digital channels, including web sites (61% of CMOs expect to increase investment) and mobile (59% expect to increase spending). CMOs also show a strong and continued commitment to social marketing, with 64% planning to boost budgets.