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Marketing budget shrinks to pre-pandemic levels, CMOs grapple with 15% fall

By Zion Rufus

The world of marketing is facing a new challenge as budgets continue to shrink, forcing Chief Marketing Officers (CMOs) and brands to find innovative ways to drive growth and maintain their market presence.

According to Gartner’s Annual CMO Spend Survey, marketing budgets have dropped to 7.7% of overall company revenue in 2024, a significant decrease from the 9.1% reported in 2023.

This reduction reflects a 15% fall in average marketing budgets, marking a critical juncture for marketing leaders who must navigate what is being termed the “era of less.”

Although this presents significant challenges for CMOs and brands, some professionals believe it also offers opportunities for innovation and strategic thinking as marketers will be compeled to remain agile and forward-thinking, and ensure that their marketing efforts are both efficient and effective.

“The future of marketing will be shaped by those who can successfully balance limited budgets with the need for innovation and growth,” said Anietie Udoh, Marketing Edge’s Divisional Director, Marketing.

The survey, conducted from February through March 2024, included 395 CMOs and marketing leaders from North America and Northern and Western Europe. These respondents represented a diverse array of industries, company sizes, and revenues, with the majority reporting median annual revenues exceeding $5.3 billion. The findings were unveiled at the Gartner Marketing Symposium/Xpo in London, providing a stark overview of the current state of marketing finance.

Ewan McIntyre, VP Analyst and Chief of Research for the Gartner Marketing Practice, highlighted the dramatic shift in budget allocation over recent years. “In the four years preceding the pandemic, average marketing budgets were 11% of overall revenue. In the four years since, they’ve dropped to an anemic 8.2%,” McIntyre explained. This significant decrease just further reveals the financial pressures that CMOs are facing as they strive to achieve growth with fewer resources.

On the bright side, despite these financial challenges, many CMOs are turning to artificial intelligence (AI) as a potential savior.

McIntyre noted, “Sixty-four percent of CMOs say they lack the budget to execute their 2024 strategy, but GenAI offers the opportunity to grow the marketing function’s impact far beyond its budgetary constraints.” The optimism surrounding AI reflects its potential to enhance productivity and efficiency, even as budgets tighten.

GenAI investments are particularly valued for their ability to deliver time and cost efficiencies. Over one third of CMOs identified these benefits as key when evaluating the return on investment (ROI) of AI initiatives. This shift towards AI-driven solutions represents a strategic pivot for many marketing leaders, who are seeking ways to maximize their impact with limited resources.

The survey also revealed significant changes in investment strategies. While paid media investments grew to 27.9% of budgets in 2024, spending on martech, labor, and agencies fell. This decline in martech investment, the lowest in a decade, does not indicate a reduced interest in technology. Rather, it reflects a shift in control, with other enterprise leaders, such as IT, increasingly overseeing martech investments.

Digital media continues to dominate paid media spend, accounting for 57.1% of budgets in 2024, up from 54.9% in 2023. Top channels include search (13.6%), social advertising (12.2%), and digital display advertising (10.7%). Offline channels like event marketing (17.1%), sponsorship (16.4%), and TV (16%) also remain significant.

McIntyre pointed out a critical mismatch between the channels CMOs are investing in and their perceived impact. “CMOs ranked digital video/streaming as the most impactful digital channel, despite it only coming in fourth in terms of spend.” This discrepancy highlights the complex decisions marketing leaders must make to balance cost and effectiveness.

Particularly in an environment where every dime spent counts, CMOs are focusing on investments that have a clear and demonstrable impact. This strategic focus is essential as they strive to drive revenue growth amidst budget constraints.