Marketing Budgets Fall as a Share of Company Revenue, Survey Finds

The online survey collected responses from 400 marketing executives in the U.S., Canada, U.K., France and Germany from March through May on the marketing budgets for their current fiscal years. Respondents came from industries including consumer products, retail, financial services, media, and travel and hospitality. Eighty-one percent came from companies with $1 billion or more in annual revenue.

Ad spending is expected to surge this year as many economies around the world reopen to one degree or another after Covid-19 pandemic shutdowns, with the media-buying giant GroupM forecasting a 19% rise in global ad revenue this year. But some of that increase is being fueled by new small businesses launched during the pandemic, many of them digital-only and investing heavily in online advertising, GroupM said in June.

And ad buys are only one part of the marketing budget. Marketing executives under pressure are continuing to try to reduce costs by taking over work that they used to outsource to vendors such as advertising and marketing agencies, said Ewan McIntyre, co-chief of research and vice president analyst in Gartner’s marketing practice.

That increasingly includes higher-priced work in marketing strategy development, innovation and technology, survey respondents told Gartner.

The pandemic presented strategic challenges for all companies, and benefited some while hurting others, but every sector wound up cutting marketing in comparison with revenue, Mr. McIntyre said.

“Budgets were cut for brands whether or not they had a positive or negative impact from Covid,” Mr. McIntyre said.

That isn’t to say marketing departments all felt equal impacts. Marketing executives at consumer products companies said their marketing budgets for the current fiscal year were 8.3% of revenue, down from 10.8%, while their peers at travel and hospitality marketers said their budgets had fallen to 5.4% from 10.2%, Gartner said.

And not every marketing budget lost ground. Tim Clevenger, vice president of marketing at Cambia Health Solutions Inc., said his company’s marketing budget as a share of revenue has stayed roughly even. He credited that in part to the company’s heavy use of so-called performance marketing, in which budgets go toward campaigns that directly generate consumer action, making it easier to justify the expense.

Cambia’s marketing department also didn’t go it alone within the company as the pandemic unfolded, according to Mr. Clevenger. “We worked much more closely with our finance team on a regular basis,” he said.

Marketing chiefs defending their budgets need to demonstrate their value to other executives at their companies, Mr. McIntyre said. “There’s a certain urgency to getting to some proof points to getting to the value of marketing,” he said.

Write to Nat Ives at [email protected]