Chief marketing officers (CMOs) are now spending a larger proportion of their budgets on technology than on internal staff, according to a survey of senior marketing executives in the U.S. and U.K.
Marketing technology (or "martech") will take 29 percent of expenditure in 2018, compared to 22 percent in 2017, while staff costs will account for 24 percent of budgets, down from 27 percent last year, according to Gartner's CMO Spend Survey 2018-2019 published Thursday.
Email marketing, online content management and digital analytics technology are the main things CMOs invest in within their tech budgets, and the report suggests that artificial intelligence could eventually be used to design marketing campaigns in future, rather than people. But allocating marketing tech budgets is complex, the report suggests, with money spent on testing technology before adopting it.
Meanwhile, 23 percent of budgets will go on external agencies, down from 25 percent last year and paid media spend (buying advertising space) will also account for 23 percent this year, down from 25 percent.
With CMOs spending an average of 11.2 percent of their company's revenue on marketing in 2018, they should focus more on measuring the impact of what it does in financial terms, the report suggests. Awareness of a brand is the most-tracked measurement, with 12 percent of respondents saying they do so, while only 7 percent measure the return on investment (ROI). "CMOs must appease the often-skeptical CFO's expectations for ROI to justify future budgetary commitments, which means being able to clearly link marketing's investments with business return," it states.
Chief marketers are urged to use budgets more efficiently, even if times are good. Budgets in 2018 have leveled: In 2017 marketers spent 11.3 percent of their company's revenue on marketing, while in 2016 the figure was 12.1 percent.
Sixty-three percent of CMOs expect budgets to increase next year, but this optimism may be tempered by trade tariffs and Brexit uncertainty. American businesses paid $4.4 billion in tariffs in September, a 50 percent increase over the same month last year, according to a coalition of industry groups called Tariffs Hurt the Heartland.
The balance between TV and digital ad spend is often discussed, in the light of Facebook and Google taking ever more marketing budget. But TV advertising could increase in 2019, with 49 percent saying they plan to up their budgets for TV and other offline media. Marketers are showing more of an appetite for spending on sites such as Amazon, with digital commerce set to take 9.2 percent of ad budgets.
Some advertisers are even moving more than half the budget they usually spend with Google search to Amazon, according to media agency executives, because some people start their product search on Amazon rather than Google. Brands such as L'Oreal advertise their online shops on Amazon, for example, and promote their products on its search results pages.
In a separate report also published Thursday, U.K. ad spend went up 6.4 percent to £5.6 billion ($7.33 billion) in the second quarter of 2018, marking the 20th consecutive quarter of growth. WARC and the Advertising Association's expenditure report also upgraded the U.K.'s full-year projection to £23.5 billion. Growth is driven by more spending online, with TV spend growing ahead of expectations, the report stated.
Gartner surveyed 621 executives online and via in North America and the U.K. at companies with more than $500 million in revenue, in July and August 2018.