The CMO Survey: Marketing Budgets Return to Near Pre-Covid Levels

Professor Christine Moorman’s research shows inflationary pressures are linked to a decrease in marketing spending

March 28, 2023

After rising to the highest levels in the last 15 years, marketing budgets dropped back to pre-Covid numbers, according to new data from The CMO Survey.

The biannual poll, a collaboration between the American Marketing Association, Deloitte, and Duke University’s Fuqua School of Business, was conducted in March 2023 and collected responses from 314 marketing leaders at for-profit U.S. companies.

The findings show a return to pre-pandemic levels for marketing expenditures as a percentage of companies’ budgets. But the yearly growth in marketing spending slowed down 72% (10.4% to 2.9%), compared with the last survey.

A majority of firms indicated inflationary pressures impacted marketing spend. “Companies tend to cut back on marketing in periods of economic uncertainty,” said Christine Moorman, the T. Austin Finch, Sr. Professor of Business Administration at Duke University’s Fuqua School of Business. “This general tendency should be tempered with an understanding of the cost to reaching consumers and what competitors are doing. In fact, inflation may be a chance to leap ahead if others pull back.”

Digital marketing less affected

Results showed digital marketing spending also slowed, but its decrease was less dramatic than in overall marketing spending (15.0% increase in digital marketing spending in the past survey vs an 8.2% increase in this survey). On average, companies spent 53.8% of marketing budgets on digital marketing.

Among industries, the biggest digital spenders are education (75.5%), technology (65.7%), and health care (64.6%).

Marketing spending on mobile tactics (currently, 19% of marketing budgets) will keep growing, respondents say, matching the pre-Covid peak and increasing 80% during the next five years. Social media marketing is also predicted to rise similarly, from its current 17%. Despite this, marketing executives don’t think these channels have contributed significantly to the companies’ performance, except for business-to-consumer product and services companies who believe social media has been impactful.

“Social and mobile are both expected to see substantial growth,” Moorman said. “However, it is important for marketers to grapple more effectively with demonstrating the performance of these investments on their businesses.”

Brand development lagging in effectiveness and spend

Among marketing areas predicted to decrease, firms say they will slow investments in customer relationship management systems, brand building, and customer experience, with the largest drop recorded in brand building (5.5% budget increase predicted vs 11.7% the previous year.)

Respondents acknowledged brand development capabilities are important to their company's success, but report a low effectiveness.

Marketing’s role broadens, now includes revenue growth, marketing analytics, and market entry strategies in many companies

While traditional marketing’s role was centered on brand, advertising, and digital marketing, more strategic areas are now under the purview of marketing leaders, including marketing analytics, revenue growth, innovation, and market entry strategy.

Consistent with this broader portfolio, firms indicate as their perceived top challenges: expanding into new markets (20.6%); reducing costs or increasing value for the same cost (18.8%); and developing, acquiring, and retaining talent (15.6%). These challenges are also among marketers’ top priorities, in addition to accelerating the move to new digital technologies.

Seventy-one percent of companies said organic revenue growth will continue to dominate growth strategies.

Marketers also signaled that “having the right talent” is the most important factor contributing to organic growth. “Having the right technology” rose the highest in the last three years (9% to 13.5%) as a determining factor for organic growth.

Short-term marketing metrics most utilized

Marketers reported a higher use of tactical, short-term metrics like sales revenues, digital performance, content engagement, and lead generation, rather than strategic metrics such as brand equity value, customer insight usage, and brand differentiation. Compared with two years ago, though, firms are increasing the use of these key metrics, with brand differentiation jumping 111% from 2021.

Customers' priorities: product quality and low price

“Superior product quality” remains customers’ top priority for next year, 32.3% of respondents said, a growing trend during the past two years. “Low price” has now become the second customers’ top priority (18.9%), also a rising trend since the inception of the pandemic.

“Marketers think that customers are feeling the strain of higher prices and prioritizing price and quality in this inflationary period,” Moorman said. “Companies may want to consider lowering prices or offering smaller versions of their offerings that customers can afford to help them stay loyal until the economy and paychecks stabilize.”

More marketing leaders wary of taking political stances

Most marketers remain unwilling to take political stances, with 70.9% of leaders saying they don’t think this is appropriate for their brand. This percentage is remarkably higher than the 18.5% of firms reporting a similar unwillingness three years ago. Within industries, education is the most willing to speak out on political issues (66.7%) and small companies with 50-99 employees are significantly more inclined (53.3%) than larger firms.

Marketers who favor brand activism believe it increases their ability to attract and retain employees, customers and partners—a result of particular relevance in light of 14.5% of marketing leaders indicating labor/skills shortage as next year’s second-biggest external challenge, Moorman said.

“Companies continue to take a very instrumental view of their brand’s political activism,” she said. “This means most of them continue to sit out. As brand purpose and ESG concerns gain traction, I think this rate will increase as company’s see the benefits to their business, especially given tight labor markets that need to work harder to attract top employees, as we see in this survey.”

For more on current and past results:

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