Chief marketing officers are spending more on external agencies and less on technology: Gartner

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Whether a chief marketing officer (CMO) has $100,000 or $100 million in his or her budget, the question comes down to how the cash is spent. And according to a new report, spend is slowing with more pressure for marketers to prove returns.

Budgets have decreased from 12.1 percent of company revenue in 2016 to 11.3 percent in 2017, according to Gartner's 2017-2018 CMO Spend Survey. Marketing technology saw the steepest decline in investment between 2016 and 2017, with a reduction of 15 percent.

The technology, sometimes known as "martech,"is used by companies in various ways, including tracking customers' browsing habits on different devices and matching that behavior to buying. It can also be used to automatically place advertising on websites, a complex process that has been subject to fraud, and has also resulted in ads appearing next to undesirable content.

Gartner carried out online and telephone research with 353 marketing decision-makers at companies with more than $250 million in revenue in the U.S., Canada and U.K. between June and August 2017.

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Martech spend decrease

In 2016, businesses spent 27 percent of their marketing budgets on technology but that figure decreased to 22 percent this year. This could be because marketers don't entirely understand the raft of tech available, with only half (51 percent) regarding themselves as effective at buying and managing it.

"The challenge is that CMOs' ascent to their lofty technology role has been swift, and the learning curve has been intense," state Gartner analysts and report authors Anna Maria Virzi and Ewan McIntyre.

"Poorly selected, under-performing or underused marketing technology forces marketing teams and agencies to rely on manual processes, which hurts marketing efficiency and effectiveness. Significant investments need to prove business value, or else they end up being considered costly vanity projects," they add.

Agencies and innovation

Spend on services, such as advertising agencies, has increased from 22 percent of overall budget in 2016 to 25 percent in 2017, while expenditure on in-house expertise has declined from 28 percent to 27 percent.

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"For CMOs, getting the optimal balance between in-house and agency resources is an enduring organizational design challenge," Virzi and McIntyre state. This year has seen consumer packaged goods conglomerates streamline the number of agencies they use, while others such as website-builder Wix have long used in-house expertise for marketing.

Innovation is one area in which CMOs are maintaining budget, with 10 percent of annual expenditure, but Gartner warns that they should differentiate between low-risk and short-term investments from higher-risk, long-term projects.

Digital advertising will continue to win over traditional media such as TV and print, with 67 percent of respondents expecting to increase digital ad spend next year. Almost the same proportion (63 percent) expect to decrease offline ad spend.