Let’s take one final look at 2020 before we move forward into 2021. In terms of marketing spend, how did budgets shape up? After reviewing budget cuts and shifts in marketing over the past year, we will look ahead at spending predictions for 2021.
Gartner surveyed 432 marketing executives in North America, the U.K., France, and Germany in the Gartner 2020 CMO Spend Survey. While this data covers companies with $500 million+ in revenue, we can extrapolate the findings to provide advice to businesses and brands under that threshold as well.
Budget Shifts
One of the biggest changes in marketing spend during 2020 involved shifting agency work in house. Across industries, 32% of CMOs switched agency work to internal teams. The types of work included:
- 53% social marketing
- 44% creative production/content marketing
- 42% video/podcast/photography production (A/V)
- 42% creative conception
- 39% PR
- 38% traditional media
- 38% programmatic media
More than half of CMOs that cut agency spending brought their social media management in house. Organic social is likely seen as an easy place to save on agency costs, with money better spent on direct revenue generators. Plus, during 2020, many brands were pushed to speak up about local and global issues. Given this more active role, it makes sense to bring social marketing in house for better brand alignment.
In terms of creative work like content marketing and creative conception, many CMOs brought these services back in house, likely both to cut costs and focus on maintaining brand equity during such an uncertain time.
Other areas, like traditional media and video production, may have been shifted to internal marketing teams due to decreased focus on these areas and limited budgets.
As CMOs plan for 2021, it’s important to look at which functional areas should remain in house and which are better managed by an agency. For example, bringing content marketing in house may have helped build brand equity and thus increase the customer lifetime value of newly acquired leads. PR, on the other hand, may require a broader network of contacts and is better served by agency management.
Martech Spending
Despite budget cuts across many areas of marketing, martech spending maintained 26.2% of marketing budgets during 2020. Spend on marketing technology made up the largest portion of budgets over media, agencies, and in-house labor.
On average, CMOs allocated their budgets as follows:
- 26.2% marketing technology
- 24.8% paid media
- 24.5% labor
- 23.7% agencies/services
As discussed above, marketers cut agency spending in 2020 by bringing some services in house. But in terms of marketing technology, it’s difficult to cut platforms that manage customer data, mobile marketing, and eCommerce, to name a few.
When looking at ways to save during 2020, CMOs clearly were not willing to risk the continuity of their business in terms of marketing and customer service. Maintaining a smooth customer journey is critical in improving customer lifetime value.
According to the survey, 68% of CMOs plan to spend more on martech in 2021. Marketers should look at investments that will boost CLV over the long term. Investments that improve customer acquisition and retention in terms of customer lifetime value are a great place to start.
As we all look for a new start in 2021, it’s a great time for marketers to implement new practices that improve brand equity and customer relationships for the long run. Instead of relying on metrics like ROAS and CAC, it’s time to make the shift to predictive customer lifetime value.
Digital Spending
Across marketing channels, CMOs allocated 81% of spend to digital. 22% of this budget covered digital advertising, while 59% went to owned and earned digital channels like social, web, SEO, and mobile marketing.
It certainly tracks that the vast majority of marketing channel spend went to digital. With cancelled in-person events and people spending most of their time at home, digital is the easiest and most efficient way to reach new and existing audiences.
According to the survey from Gartner, CMOs allocated their budgets by channel as follows:
- 13.5% on digital advertising
- 11.3% social marketing
- 10.4% website
- 9.9% SEO
- 9.8% mobile marketing
- 9.4% offline advertising
- 9% event marketing
- 9% partner/channel marketing
- 8.9% email marketing
- 8.6% paid search
As expected, digital advertising and social marketing top the list. In 2021, marketing leaders should now look at channels by customer lifetime value to see which ones bring in the most loyal and highest value customers. If spend is allocated according to CLV, marketers will improve brand equity and customer relationships.
2021 Predictions
The Gartner survey also determined that 62% of CMOs expect total media spend to “bounce back” in 2021. More than half of CMOs plan to spend more on digital advertising and paid search this year as well.
Overall, CMOs across industries were forced to make budget cuts in 2020. Most remain optimistic that spending will increase again in 2021. With larger budgets available, CMOs should start planning how to allocate that additional spending.
Instead of just increasing paid search budgets or social media spending in aggregate, it will be most impactful to focus spending on activities that bring in and retain high-value customers. By focusing on customer lifetime value, CMOs can make the most of their budgets and bring in loyal, valuable customers for 2021 and beyond.