More Money for Marketing – Budgets to Increase Again

Good news for companies with products that target Marketing groups. There should be more money to go around this year. According to a Gartner report published in October of 2016, the average Marketing budget is now up to 12% of company revenue.

The numbers don’t vary too greatly between B2B and B2C companies, with B2B companies receiving 12.3% of the company’s revenue vs 11.6% for B2C brands. Unsurprisingly, high tech companies devote the largest percent of revenue to marketing, at 13.3%

The key in the budget escalation is that large enterprises have accepted the new world of marketing. For many years, social media was a place where the smart and hungry start-ups could out-maneuver their established competitors for a fraction of the cost of a traditional marketing budget. But according to Gartner, enterprises have adapted. “Large established brands must out-market startups. As scrappy disrupters threaten the hard-earned franchises, these more established companies are forced to compete defensively, which may necessitate higher investments in everything from customer insight to innovation to advertising.”

One traditional marketing tactic appears to continue its importance. 65% of marketing leaders surveyed said they plan to increase spending on digital advertising, with 23% expecting a significant increase. This is being led by the increased importance of video, which is more expensive than other digital techniques for both media and production.

But many people ask, “With all the marketing automation tools and programmatic advertising designed to decrease marketing costs, why do budgets need to increase?”

“The problem with marketing automation tools is that everyone has access to them,” says Marketing Consultant Elizabeth Case. “So instead of competing for a customer’s eyeballs in a landscape of 100 touchpoints, we’re all competing to attract that same eyeball in 100,000 touchpoints. Thus, while they may get more for their money, they still need to spend more money to find the eyeballs.”

However, the news is not all good across the board. While the average marketing exec expects a bigger checkbook, a higher percentage than ever before (14%) expect to see a cut back. So why the contrarian approach from this group? Ironically, it’s the media companies that are cutting back their marketing spend. The industry that is most reliant on advertising to survive, is being forced to slash their own marketing budgets.

Also, marketers at smaller companies are being asked to do more with less. “CEO’s of small to mid-sized businesses read the articles and believe the promise that whatever technology they invest in can save them 10-50%,” says Derek Merdinyan, CEO of video production company Video Igniter. “So the marketing folks at SMB’s are being asked to run premium campaigns on a shoestring budget. Meanwhile, the enterprises are now spending more so they can catch up to the ways they’ve been traditionally outmaneuvered by start-ups.”

So what kind of technology companies benefit from this shifting landscape?

  • First, Gartner sees a tighter integration between sales and marketing teams. Marketing programs that easily integrate with CRM’s are likely to be adopted.
  • Next, the CMO is gaining responsibility. According to Gartner, in more than 30% of organizations, at least some aspects of sales, IT and customer experience report into the CMO.
  • Finally, Gartner states that Marketing leaders will set aside 10% of the marketing budget for innovation. Customer experience and digital commerce are the top two areas of innovation projects marketing leaders say they’re currently pursuing — 53% for customer experience and 51% for digital commerce.

So in the end, there’s more money to be had from Marketing departments. But it’s not a simple gold rush. Companies must be wise in what they offer and who they target. If they have the right use case for the right audience, they should be able to grow their own revenues.

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