Marketing’s digital transformation brought with it unprecedented growth, both in the scope of the function and in its spending power. New channels, new technologies, and new capabilities demanded new levels of investment. But the good times couldn’t last forever, and the pandemic ushered in a new, more austere era as budgets flatlined. This placed chief marketing officers (CMOs) under pressure to reduce spending on previously sacrosanct parts of their portfolio, such as marketing technology.

Gartner’s annual survey of hundreds of CMOs charts the evolution of marketing spending over recent history, offering guidance for how enterprise leaders can deliver results and build the capabilities to fuel growth in a time of less.

Nobody Got Fired for Spending on More Digital and Tech

When did you first become digital? I got my first job with the word “digital” in the title 20 years ago, which I guess makes me something of a digital marketing veteran. Back then I spent almost as long building business cases as I did activating campaigns. It’s easy to forget, but making the switch from offline to digital in the mid-2000s was far from a no-brainer. Digital marketing leaders were always hungry for more — more budget, more technology, more data, more people, more attention from the leadership team.

Indeed this was the start of the period of more. Digitization hit marketing hard, and the possibilities to engage, connect, and transact with consumers and customers created a massive opportunity. It also created a challenge for CMOs, who struggled to balance the budget demands of their plucky digital marketing leaders alongside non-digital leaders. And the former presented a compelling argument: We constantly extolled the virtues of digital as the cost effective, measurable, and optimizable choice. By contrast, anything offline seemed stuffy, old-fashioned, and, well, analogue.

Nobody Got Fired for Spending (Even More) on Digital and Tech

The period of more lasted for quite a long time. Digital is a hungry beast after all, with a seemingly unending array of alluring tools, tech, talent, and channels. I became a marketing analyst back in early 2016 — a time when martech and digital channels accounted for a serious chunk of total marketing budgets. At that time, our annual CMO Spend and Strategy Survey reported average enterprise marketing budgets at a whopping 12.1% of company revenue. More than a quarter of the total marketing budget was allocated to technology in 2016, and each of the top three channels ranked by spend were digital.

While 2016 may have represented a high watermark in terms of total marketing budget, it certainly wasn’t an outlier — indeed, technology spend as a proportion of total marketing budgets peaked at almost a third (29.2%) of marketing budgets in 2018. And marketing budgets averaged an impressive 11.2% of company revenue between 2016 and 2020.

Less, But Still More

When we surveyed CMOs in early 2020, before pandemic lockdowns, CMOs couldn’t have anticipated the full scale of the Covid-19’s impact: demolished marketing budgets and disrupted customer journeys. But the pandemic also presented another boost for digital and technology. Brands that previously lagged their peers now had little choice but to switch to digital channels to engage and transact with locked-down audiences. Brands that had already invested heavily in digital had little choice but to further accelerate investments.

So, even when there was less, there was more. More e-commerce, more digital channels, and more tech. When we surveyed CMOs in 2020, they reported that they were more likely to protect their investments in tech than other elements of the resource mix, such as paid media or agencies, as they believed tech would be an essential tool to help them grow post-pandemic — when we hit the “new normal.”

The Long Post-Covid Climb-Back

Like a carrot dangling on the end of a stick, the “new normal” has been frustratingly out of reach over the last few years. The World Health Organization may have declared the end of the Covid-19 global health emergency, but we’re still pretty far from normal. From the recent failures of major banks to the volatility of various social media platforms, these issues weigh on the minds of the entire C-suite, regardless of their level of exposure to their impact. This seemingly unending set of disruptions result in a number of anchors on growth for the enterprise:

Higher interest rates impacting the ROI potential of new investments. In the current macroeconomic environment, investors are prioritizing profits and cash flow today rather than holding out for future growth. Higher interest rates are also weakening demand in the economy, dulling growth.
A stubbornly difficult talent market with higher rates of staff turnover, increasing competition for strategically important roles, reduced employee trust in management, and tensions regarding hybrid and remote working.
Lagging digital transformation, with the 2023 Gartner Board of Directors Survey reporting that 81% of boards have not made progress toward or achieved their digital business transformation goals. Furthermore, a 2022 Gartner survey found that 67% of CFOs believe the last three years’ digital spending has not met enterprise expectations.

While it’s convenient to frame recent enterprise history in pre- and post-pandemic terms, another inflection point may also have occurred. Enterprises have pivoted from a period of concentrated investment in the tools and capabilities that support digitally led growth to an era when these investments need to start paying back.

When technology investments and digital marketing are no longer cool and different, they’re mainstream. In Gartner speak, such investments have shifted from being the system of innovation — transformative, disruptive, and largely unproven — to being the system of record — where the prevailing strategic force is operational efficiency, and the enterprise expects predictability, reliability, and stability.

We’re (Not) Going to Need a Bigger Boat

That brings us to 2023. Data from Gartner’s annual CMO Spend and Strategy Survey published in late May suggests that the era of more has come to an end. Firstly (and most obviously), it reveals that the marketing budgets of the 400+ North American and European CMOs we surveyed have not recovered to their pre-Covid peaks. In fact, gains reported in 2022’s survey have slipped, with average budgets down from 9.5% of company revenue in 2022 to 9.1% in 2023.

Perhaps more worrying than the top-level budget trend is an apparent squeeze on marketing’s spending power. Increasing costs (of talent and digital media) and decreasing yield (of marketing technology utilization rates) has created a marketing cost-of-living crisis akin to that experienced by consumers in many markets over the last 18 months. Simply put, each marketing dollar buys less. So, in very real terms, we’ve switched from the era of more to the era of less.

The financial and psychological impact of the era of less can be heard loud and clear in the responses to this year’s survey. More than 70% of respondents report that their enterprise lacks sufficient budget or resources to successfully deliver its marketing strategy in 2023. Seventy-five percent of respondents state that their enterprise is asking them to do more with less, and 86% report that they’re under pressure to make significant changes to how marketing works to achieve sustainable results.

Perhaps the most surprising findings from this year’s survey relate to the enterprise growing impatient with technology investments. Three-quarters of respondents reported that they’re facing pressure from the enterprise to cut investments in martech — unthinkable just a few years ago. What’s more: The seemingly inexorable rise of digital media has stalled. When we look at the proportion of media spend allocated to digital versus offline channels, it’s fallen one percentage point to 55% in 2023. In 2023 it’s entirely possible to get fired for spending more on digital and tech. To misquote the classic 1975 film Jaws: We’re not going to need a bigger boat; we’re going to need a more efficient one.

Adapting to the Era of Less

On the subject of classic ’70s cinema, Francis Ford Copolla famously said of his 1979 magnum opus Apocalypse Now, “There were too many of us, we had access to too much money, too much equipment, and little by little we went insane.” This is not to say that CMOs have experienced the sort of excess Copolla is speaking of, but he does refer to one of the major challenges of more: Sometimes more can actually deliver less. Or, to flip this around, sometimes you can get more from less.

But delivering more with less is one of those terrible clichés — easy to say and significantly harder to achieve. It’s challenging because more is the go-to state for most enterprise leaders. In the thousands of conversations I’ve had with CMOs and marketing leaders over the years, a reasonable chunk entails a variation on the theme of “How can I build a business case to grow my marketing budget?” Another reasonable chunk? “How do I define the stuff I can afford to cut and the stuff I can’t afford to lose?”

The answers to these fundamental questions cannot be found in shiny new technologies; rather, it’s the strategic version of eating your greens. As a leader you need to have a firm plan that defines the scope of marketing and be painfully clear about how the function’s scope ladders up to enterprise goals.

Furthermore, your plan must be grounded in both the near-term actions that will deliver the leads and sales that keep the lights on today, alongside the investments that will contribute toward differentiation and growth tomorrow. This requires a nuanced story setting out marketing’s value proposition to the enterprise — how marketing delivers return on objectives alongside return on investment. And it requires an acceptance that the job of building this value story is not about econometric models or attribution analysis; these are a means to an end, not the end itself. It’s about coming to a mutual understanding with stakeholders of how marketing delivers value.

It’s also about embracing and exploring the uncertainty that abounds and using the core strategic tools of scenario planning and sensitivity analysis to understand the prevailing issues that are material to success, enabling your team to develop strategic options that respond appropriately.

By returning to the first principles of sound strategic management, marketers will create a plan that rids them of the extraneous stuff, enabling a focus on the right less that’s most likely to support the delivery of goals.

To frame this in a slightly different way, at Gartner we talk about how CMOs can free themselves from the tyranny of more by focusing on three key leadership traits:

Clarity. Choicefulness matters. CMOs must make clear-eyed decisions on what will — and will not — be supported over the life of the strategy. Equal thought and consideration should be given to the initiatives that don’t make the cut, and to clarity on why that’s the case.
Courage. Leaders must have the courage to ask difficult questions of their team. It identifies spurious assumptions, strategic sentimentality, and harmful cultural norms. For example, CMOs must dispel the sunk-cost bias of “just because we’ve spent $100,000 on a program, it doesn’t mean we should spend $100,000 more.” Similarly, CMOs must battle historic assumptions of value: Just because an investment made sense three years ago, it doesn’t mean that the business case just rolls over year-on-year. All major investments should be able to justify themselves based on measurable contribution to future goals, not those in the past.
Connection. Success is almost always a collaborative endeavor. The start of successful collaboration is communication and understanding. CMOs must collaborate with CFOs, CSOs, CIOs, et al., with a clearly defined and shared understanding of how marketing’s programs deliver against business objectives. Likewise, they must have an understanding of where marketing intersects with other functions in the value-creation process. Ditch the obscure metrics and three-letter acronyms so beloved of marketing. Translate brand speak into business speak to demystify marketing and increase connection.

Wait, But What About AI?

You may be asking “surely AI changes everything?” Perhaps the transformative power of AI will usher in a new era of digital investment.

But the reality is complicated for a couple of reasons.

First, AI isn’t particularly new to marketing — it’s been there, hiding in your tech stack (and the tech stacks of your partners and agencies) for years. Second, while the promises of generative AI amp up interest and enthusiasm, this is all happening at a time when utilization rates of technology have plummeted. Gartner’s 2022 Marketing Technology Survey reported that the utilization rate of martech is only 42%. So, for every dollar you spend on martech, you’re utilizing less than half of the investment. Given marketing technology has consistently accounted for more than a quarter of the total marketing budget, this level of yield is more than a technology risk — it’s a fiscal risk.

This level of fiscal risk doesn’t prevent CMOs from looking at new technology solutions. But it should make them think really hard before plunging headfirst into new commitments.

Will There Ever be More More?

The general rule of enterprise finance is that marketing budgets drop like a stone at the first sign of trouble and rise like a feather once the environment is more settled. In mid-2023 we’re far from a settled state — projected GDP growth in western markets is depressingly flat, inflation is proving to be rather stubborn, and those disruptions just keep on coming. It’s tough to see a significant increase in marketing budgets in the near term.

However, the picture is somewhat mixed. Averages mask variances, and budgets differ significantly across industries and geographies. If you’re a CMO marketing consumer goods, the chances are that your budget in 2023 is much healthier than your counterparts in financial services. And if you’re based in Germany, the chances are that your budget is less healthy than your U.K.–based colleagues’. However, across all industries and markets we surveyed in 2023, budgets lag pre-pandemic levels.

What of 2024? Predicting the future has always been a fool’s errand. Perhaps we will again see another era of more as new technologies, experiences, and channels open up brave new opportunities for marketing. And perhaps we’ll have learned valuable lessons from the era of less that will make marketing lean and efficient, even with increased funding. Perhaps.