When you dive into the research on marketing budgets in Gartner's latest CMO quarterly, the source of the general malaise in the industry becomes strikingly clear.
In short, there's no money.
How much less? A lot less than those glorious pre-pandemic years. Marketing budgets have fallen from an average of 11% of revenue for the four years pre-pandemic, to 8.2% in the four years since the pandemic's peak.
The research also reveals the truly staggering statistic that only 24% of CMOs say they have sufficient budget to execute their 2024 strategy.
Growth is slowing and questions abound about why.
Is it marketing? Is it product? Is it the competition? Is it the economy? Is it the weather? Metrics that were improving are now clearly getting worse.
Sure you can tell your CMO to "Do More with Less" but it's also an opportunity to rethink how brand-marketing can be more impactful.
Let's define terms: What do we mean by brand-marketing?
The strength of a brand is ultimately measured in two ways. First, the customer acquisition you get when you turn everything off (e.g. ads, discounts, etc). Second, your ability to raise prices (or reduce discounts) faster than the rate of inflation and not lose customers.
Brand-marketing, isn't just your advertising. It's everything you do.
Service. Price. Product performance. Packaging. Availability. Partnerships, collaborations and sponsorships. Owned platforms. Personal branding and influence of the founder. Work culture and employer branding. Word of mouth. E-commerce/ retail media. Content and Community. Visual presentation in store. Salesperson input. Delivery. Installation and initial use. Returns and refunds. Support and maintenance. End of life and disposal. Every action and interaction, every channel and touchpoint is a chance to make an impact.
And all of these things - are in a sweet spot for marketing to support. They have a major impact on the key customer metrics – acquisition, retention, cross and upselling.
The diminishing returns of "performance" marketing
Brands can get overly-reliant on bottom-funnel, short-term revenue-maximizing strategies and tactics. The dopamine hit from putting a dollar in the Meta Machine is addictive.
As with any addiction, the need for more dollars in to get the same dollars out keeps increasing. But its hard to feel that pain since the change is gradual - peppered with times where performance improves...briefly.
It ropes you back in, keeping you convinced that if you just write a better tagline or find the perfect static asset CTA variant, you'll unlock ROAS of the early days.
Yet, if you go beyond maximizing ROAS and Revenue and start looking at the composition of new customer revenue traffic sources, you discover that a larger and larger portion is connected to paid traffic sources.
The proportion of new customer revenue from owned and organic channels is decreasing as a percentage of total, making it more and more expensive to hit growth goals.
Stepping back and looking at that data over a number of years makes it clear that change is needed.
BCG tells us what happens to companies that cut their brand-marketing spend
1. Costs Rise. Regaining lost market share requires a future investment of $1.85 for every $1.00 saved from near-term reductions in brand spending. This is the consequence of one fundamental tenet of marketing: at an individual level, it costs more to gain than to maintain mindshare.
2. Total shareholder return declines. The TSR of companies that decreased brand spending from 2017 to 2019 was 6 percentage points lower over the 2018 to 2021 period than the TSR of those that increased brand spending.
3. Growth rates underperform. Sales CAGRs for brand spenders in the bottom quartile of its research were 13 percentage points lower than the CAGRs of the top quartile.
4. Market share drops. Companies that cut brand spending lost 0.8 percentage points of market share relative to those that boosted brand spending.
5. Conversion and brand health weaken. Bottom-quartile brand spenders had an awareness-to-purchase conversion that was 6 percentage points lower than that of brand spenders in the top quartile. Their association with top consumer needs was two to three times weaker, and consequently, their likelihood of being recommended was 18 percentage points lower.
Two words: Brand Reset
CEOs, CFOs and CMOs need to work together to rethink spends as brand-marketing investments pay out across a diverse set of stakeholders, not just marketing.
If you're looking to drive growth, get more profitable or navigate the diminishing performance of your "performance" marketing, or if you know that investing in building brand is essential, but the "how" is less clear, our StoryDoing approach is for you.
It starts with a data deep dive to understand the true state of revenue.
Rethinking what success looks like, what customers you serve, how you serve them, whom you compete against, what external forces you regard as relevant, how you interpret those forces to arrive at an intentional narrative for the brand and business.
We'll build this narrative into how you innovate and how you communicate for an actionable playbook ready to implement.
What you'll get:
- Sprints customised to your needs and run internally with your team: Our structured process helps x-functional teams question the status quo to shape and share ideas they want to build on.
- Expert insights: Jumpstart your thinking and learn from leading brands and ventures already making waves.
- Practical tools: Gain access to frameworks that help you identify and back the right opportunities.
Connecting story with system creates incredible network effects across the business for a radically better return on brand spending.
Want to get more impact out of your brand-marketing budget? Let's talk.
