Marketing budgets are shrinking as a share of company revenue, according to the latest survey by marketing research firm W2O Group. The study found that in 2017, companies allocated an average of 14% of their total revenue to marketing spending.
The marketing spend by industry 2020 is a study that shows how marketing budgets are falling as a share of company revenue.
According to Gartner Inc.’s annual CMO Spend Survey, marketing expenditures have dropped to 6.4 percent of sales this year, down from 11 percent last year.
According to Gartner, the current number is the lowest since the study started in 2012, and it is the first time it has fallen below 10%.
From March through May, 400 marketing executives in the United States, Canada, the United Kingdom, France, and Germany completed an online poll on their current fiscal year’s marketing expenditures. Consumer goods, retail, financial services, media, and travel and hospitality were among the sectors represented by respondents. Eighty-one percent were from businesses with yearly revenues of $1 billion or more.
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As many markets across the globe reopen to some degree or another after the Covid-19 epidemic shutdowns, ad spending is likely to soar this year, with media-buying behemoth GroupM predicting a 19 percent increase in global ad income this year. But, according to GroupM, part of that growth is being driven by new tiny companies that sprang up during the epidemic, many of which are digital-only and highly invested in internet advertising.
And ad purchases are just a small portion of the overall marketing expenditure. According to Ewan McIntyre, co-chief of research and vice president analyst at Gartner’s marketing practice, marketing executives under pressure are continuing to strive to cut costs by taking on tasks that they used to outsource to vendors such as advertising and marketing firms.
According to survey respondents, this increasingly involves higher-priced labor in marketing strategy creation, innovation, and technology.
The pandemic posed strategic difficulties for all businesses, benefiting some while harming others, but Mr. McIntyre noted that every industry ended up reducing marketing in proportion to sales.
“Budgets were slashed for brands regardless of whether Covid had a good or negative impact,” Mr. McIntyre said.
That isn’t to argue that all marketing departments were affected equally. Consumer goods marketers stated their marketing expenditures for the current fiscal year were 8.3 percent of sales, down from 10.8 percent last year, while travel and hospitality marketers said their budgets were 5.4 percent, down from 10.2 percent, according to Gartner.
Not every marketing budget suffered a setback. Cambia Health Solutions Inc. vice president of marketing Tim Clevenger said his company’s marketing spend has remained about equal as a percentage of sales. He attributed this in part to the company’s extensive use of so-called performance marketing, in which funds are allocated to campaigns that immediately result in customer action, making the cost more easily justified.
According to Mr. Clevenger, Cambia’s marketing department did not go it alone inside the business while the epidemic progressed. “On a regular basis, we worked considerably more closely with our financial team,” he added.
Mr. McIntyre advised marketing executives defending their budgets to show their worth to other executives at their businesses. “There’s a sense of urgency in getting to certain proof milestones in terms of marketing value,” he added.
Nat Ives can be reached at [email protected]
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The how much do companies spend on market research is a question that has been asked by many people. A recent survey found that marketing budgets fall as a share of company revenue.
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