Blog post

CMO Spending is on the Rise (Again!)

By Jake Sorofman | October 25, 2016 | 1 Comment

digital marketing

Every year, Gartner for Marketing Leaders follows the money, reporting on how marketing leaders allocate and prioritize their spending—and, by extension, how they telegraph what really matters.

Gartner just published its 2016-2017 CMO Spend Survey (subscription required). The first reaction to our annual study is simple: marketing matters. In fact, if you look at the last three years of marketing budgets, you’ll likely conclude that marketing matters like never before. This year, marketing leaders tell us, on average, they’ve allocated 12% of company revenue to the marketing expense budget.

Compare this to last year’s 11%, which itself was pretty extraordinary, and you see my point.

But with power comes great responsibility. And that isn’t just comic book wisdom; it’s also an apt description of what it means to be a CMO today. Yes, marketing budgets are on the rise, but by taking custody of these dollars, CMOs are promising more and more back to the business.

According to this year’s survey, for many CMOs, this means taking on responsibilities outside of their traditional purview. In fact, according to our survey, CMOs have taken on responsibility for aspects of sales, IT and customer experience functions in 30% or more organizations.

We also found that CMO spending on technology now rivals CIO spending on the same. Twenty seven percent of the marketing expense budget is now allocated to technology, or 3.24% of revenue in 2016. That’s higher than what CMOs spend on paid media (22%) and a shade under what’s allocated to labor (28%). Compare the CMOs tech spending to the CIO’s tech budget of 3.4% of revenue and you see that we called it right: Gartner’s now famous prediction about CMO tech spending is on track to come true.

We’re also seeing a strong correlation between a CMO’s willingness to share in the risk and the size of the budget they’re able to command. For example, the budget for a CMO who owns or shares P&L responsibility is 20% higher than the budgets for the CMOs who don’t have this level of accountability.

The lesson? Responsibility and accountability are what it takes to grow your marketing budget. With power comes responsibility. But the converse is equally true: with responsibility comes power.

This year’s survey is generally a feel-good story for marketing leaders. However, there are potential threats looming: While the majority of marketing leaders expect budget increases again next year, the percentage of marketers bracing for a cut has grown nearly 5X from this time two years ago.

What could this mean? Looming macroeconomic questions may be a factor. But, more likely, it’s a function of attributable marketing performance. Accountability, after all, cuts both ways. These supersized budgets come with strings attached. What is given can also be taken away.

Want to see more? If you’re a Gartner for Marketing Leaders client, you can read the full report here.

Here’s to spending wisely and well in 2017!

The Gartner Blog Network provides an opportunity for Gartner analysts to test ideas and move research forward. Because the content posted by Gartner analysts on this site does not undergo our standard editorial review, all comments or opinions expressed hereunder are those of the individual contributors and do not represent the views of Gartner, Inc. or its management.

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1 Comment

  • Sam Melnick says:

    Thanks for the update and sneak peek, Jake.

    2 quick comments:

    1) Love this quote: “Responsibility and accountability are what it takes to grow your marketing budget. With power comes responsibility. But the converse is equally true: with responsibility comes power.”

    Comfortable with it or nor marketers need to work to be more accountable and much more precise on where their dollars (and time) are going and what they are getting from it. 100% agree with you there.

    2) From my perspective, the idea that marketers are weary of budget cuts in near future, also speaks to the need of the CMO (or marketing leader) to continue thinking more like a GM than a departmental head. Whether that is connecting rolled up activities to broader corporate objectives or working to get marketing spend and returns in more of “PnL” type views.

    Is that a common tread you are seeing/hearing? or does a PnL type view go too far?

    Sam Melnick