I thought updating my annual B2B marketing budget blog would be a snap. Just update a few data points and done! What I have realized is that marketing is in upheaval and budget planning for 2019 will take some thought. While Gartner is predicting contraction in marketing budgets, looking more closely, I see the situation not to be belt tightening as much as adjustments and realignments. Here is what I predict for 2019:
- Budgets continue to grow, though at a slower rate than the past few years.
- Marketers need to look carefully at what should be included under the umbrella of marketing.
- Digital Transformation realities are taking a toll on marketing.
Let’s look at each of these more closely.
Marketing Budget Growth: Call it Deceleration
Research shows that marketing budget growth is slowing down but nothing to call a big pullback.
Deloitte’s August 2018 CMO Study shows expected change in marketing budgets over next 12 months to be 7.9%, a sizable drop from a high of 10.9% in Feb 2017, the highest since 2010.
In reality, a positive 7.9% marketing budget increase is still quite healthy. There are two key areas that could use some attention: martech and digital.
Are we really surprised that both of these fall into that tug-of-war land between marketing and IT?
One area that is definitely declining is traditional advertising. Traditional ads are down to nearly zero, but that’s being replaced with digital marketing so it’s a wash rather than a net decline in budget.
It’s time to start working out that divide between the CMO and the CIO. The martech landscape continues to mushroom and digital transformation means adding AI, mobile, IoT, blockchain and other technical applications to enhance customer experience.
Forty-two percent of respondents to CIO’s recent State of the CIO survey say that their marketing department currently has budget specifically earmarked for investments in technology products and services. (Source CIO.com)
Martech continues to account for a significant proportion of CMOs’ spending power, with 22% of the total marketing expense budget allocated to technology. However, this is a significant drop year over year, as last year’s CMO Spend survey reported that 27% of marketing budget was allocated to martech, representing a fall of 15%. Why? Because marketing isn’t really very good at tech selection or adoption.
IT needs to know that marketing is not fluff. At this point IT should be catching on that a significant digital evolution is going on related to enhancing the customer experience and gathering data off of every transaction. The reason we bring this up in the budget discussion is that the related technology has a big impact on marketing budget. If a substantial part of the marketing infrastructure cost can live in IT then marketing can free that up for more specific lead generation activities.
Like it or not, marketing needs IT expertise. It’s time for them to bridge that relationship.
Tip to marketers:
- Go ahead and give some of that budget back to IT
- Get IT help in selection, implementation and adoption to ensure success
- Reach out to IT for custom development needs for mobile apps. You might be surprised what know-how is already inhouse.
- Talk to IT and see what digital marketing capabilities their IT consultants have. You might be able to leverage existing relationships for scale.
Large enterprises are hiring Chief Digital Officers or CDOs to manage Digital Transformation. (See Rise of the Role of Chief Digital Officer). This is a role that encompasses both IT and Marketing elements in the Digital Transformation that’s about technology evolution such as cloud migration as well as improved customer experience.
Which brings us to our second point.
Whose Budget Is It Anyway?
If you believe in sales and marketing alignment and Digital Transformation, you already know the lines between sales and marketing and marketing and IT are blurred. Add a CDO into the mix and you have many options for where what might be called “marketing budget items” might go. We looked at the Deloitte CMO Survey breakdown and saw a lot of possibilities. Here are a few thoughts:
- Does PR belong in marketing? What about investor relations?
- What does the product team cover? Can we let them have competitive intelligence, market entry strategies, pricing, market selection?
- What does sales ops or enablement cover? Can we give Sales Enablement the budget for sales, CRM, sales tech, sales enablement?
What we see in the Deloitte CMO survey is a trend away from marketing ownership in:
- New Products
- Market Entry Strategy
- Marketing Research
Where we do see more ownership in marketing is under:
- Digital Marketing
- Customer Experience
- Revenue Growth
Yep. Sales. Time for marketing to participate in revenue goals. One area that the major studies seem to overlook is Sales Enablement. Thought we know from the foundation of the Sales Enablement Society as well as research from CSO Insights that Sales Enablement is on a growth trend. And CSO Insights has shown that Sales Enablement can be a stand alone function but if it’s not, often lives under marketing and thus needs to be funded.
Digital Transformation and Customer Experience
Digital Transformation is one of those terms that makes us think “IT” so why do I bring it up in a marketing budget conversation? Digital Transformation is much more than just migrating a company to the cloud. A lot of what going digital is about is to bring the customer relationship closer: to gather more data from customer engagement, to build intelligence into responsiveness, and to make all of that more social and mobile. So marketing has to be brought into the Digital Transformation conversation.
We’ve already talked about marketing’s challenge with selecting tech. What several of the analysts point out is that the Digital Transformation road thus far has been a rocky one, with poor understanding, bad technology selection, poor adoption and/or execution. That means one of the points of contraction, or shall we call it regrouping, is around marketing’s effectiveness in Digital Transformation to date.
In 2019 marketing needs to look closely at what’s working and what’s not. This means a realistic approach to the 2019 marketing budget with perhaps a tempering of 2017-18 exuberance for throwing all the technologies at it at once.
Where does that leave the B2B marketing budget planning for 2019?
The prediction for 2019 marketing budgets is a positive one. Out with old school ads and in with new digital tech. Marketing has to focus on what’s important and what brings in the leads and creates a better customer relationship. Bottom line: take a fresh look at your relationship with IT; that’s more critical than ever to success in the new digital world.
About the Author: Kathleen Glass is a strategic advisor for WyeComm, a Stagwell Company, and founder and CEO of Oinkodomeo, a B2B sales and digital marketing agency. Follow on Twitter @KathleenGlass