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London, U.K., —As the last of the Cannes Film Festival goers ready to depart, the red carpets are being prepared to swiftly change channel. Gigantic banners will soon herald the arrival of the Cannes Lions International Festival of Creativity. La Croisette braces for the influx of marketers, creatives, and industry leaders, all descending upon the iconic Riviera to sip rosé and applaud each other’s creative ingenuity. Meanwhile, The Ritz Carlton readies itself for the annual footfall of marketing’s elite, turning a bling eye, to the brewing storm that threatens to cast a shadow over the festivities.
Gartner’s latest CMO Spend Survey reveals a sobering trend: marketing budgets have plummeted to a mere 7.7% of overall company revenue in 2024. This 15% drop from last year marks a stark contrast to pre-pandemic days when marketing departments enjoyed a more robust 11% slice of the revenue pie.
At the heart of this annual survey are insights from 395 CMOs and marketing leaders spanning North America and Europe. The findings, unveiled at the Gartner Marketing Symposium/Xpo in London, underscore a critical shift in strategy as CMOs navigate the “era of less.” Ewan McIntyre, VP Analyst at Gartner, encapsulates the sentiment, noting, “CMOs are living in an ‘era of less’. In the four years preceding the pandemic, average marketing budgets were 11% of overall revenue. In the four years since, they’ve dropped to an anemic 8.2%.”
Despite a reduction in spending on technology, labor, and agency partnerships, investment in paid media has climbed to 27.9% of the total budget. Digital media dominates this sector, with channels like search, social advertising, and digital display accounting for the bulk of the spend. However, a disconnect persists between investment and perceived impact, as digital video, despite its lower budget allocation, is hailed as the most effective medium. McIntyre observes, “There’s a mismatch between the channels CMOs are investing in and their perceived impact. For example, CMOs ranked digital video/streaming as the most impactful digital channel, despite it only coming in fourth when it comes to spend.”
AI emerges as the beacon of hope in this constrained landscape. According to McIntyre, “Sixty-four percent of CMOs say they lack the budget to execute their 2024 strategy, but GenAI offers the opportunity to grow the marketing function’s impact far beyond its budgetary constraints.” Over a third of surveyed CMOs cite AI’s time and cost efficiencies as top benefits, pointing to a future where innovation and resourcefulness pave the way for growth.
As the champagne is getting shipped in to Cannes and marketers warm up their expenses, in the boardrooms, brand CEOs are facing a starkly different reality. The big bosses want results, and they’re pushing hard for CEOs to juggle an increasingly impossible set of priorities:
ONE - Driving Sustainable Growth
• Revenue Growth: In a bid to maintain financial health, boards are urging CEOs to ensure the company achieves steady and sustainable revenue growth despite economic challenges. This often involves strategic manoeuvres such as expanding market share, entering new markets, or diversifying product offerings to mitigate risk and capture new opportunities.
• Profitability: Alongside revenue growth, maintaining or improving profitability is paramount. CEOs are tasked with implementing cost management measures, enhancing operational efficiencies, and optimising the product mix. This focus on profitability ensures that growth is not only robust but also financially viable in the long term.
TWO - Enhancing Digital Transformation
• Innovation and Technology: The digital revolution continues to reshape industries, and boards are pushing CEOs to stay at the forefront. Investing in and adopting new technologies to improve operations, enhance customer experience, and remain competitive is crucial. Leveraging AI, automation, and data analytics are key components of this digital push, enabling companies to streamline processes and uncover new insights.
• Digital Marketing: As traditional marketing budgets shrink, digital marketing strategies become even more critical. Boards expect CEOs to strengthen their digital presence, optimise online sales channels, and utilise social media and content marketing effectively. This digital emphasis not only ensures broader reach and engagement but also aligns with evolving consumer behaviours.
THREE - Strengthening Customer Relationships
• Customer Experience: Enhancing the overall customer experience is a top priority. Boards are keenly aware that high levels of satisfaction and loyalty are essential for long-term success. CEOs are therefore encouraged to prioritise initiatives that improve every touchpoint of the customer journey, ensuring consistent and positive interactions.
• Personalisation: In an era where consumers expect tailored experiences, personalisation is crucial. Boards are pushing for the use of data and insights to deliver personalised communications and experiences. This approach fosters deeper connections with customers, enhancing loyalty and driving repeat business.
These boardroom directives reflect a strategic alignment with the challenges and opportunities of the current market landscape. And, for agencies, this shift necessitates a strategic pivot to remain competitive. Their priorities should look like:
ONE - Embrace AI and Automation
Leverage GenAI to enhance productivity, streamline operations, and deliver more value with fewer resources. Investing in AI tools can help agencies stay ahead of the curve and meet client expectations effectively.
TWO - Focus on High-Impact Channels
Prioritise investments in digital video and streaming, which have been identified as highly effective. Align spending with channels that offer the highest ROI to maximise budget impact.
THREE - Strengthen Client Relationships
In an era of reduced budgets, fostering strong, trust-based relationships with clients is crucial. Provide strategic insights and solutions that address their most pressing challenges, positioning your agency as an indispensable partner.
FOUR - Invest in Talent Development
Ensure your team is equipped with the skills needed to thrive in a digital-first environment. Continuous learning and professional development will keep your agency agile and ready to adapt to changing market conditions.
By focusing on these priorities, agencies can navigate the challenges of the current landscape, ensuring sustainable growth and resilience in an era defined by budgetary constraints and heightened expectations.
Gartner’s 2024 CMO Spend Survey highlights a tipping point for marketing leaders, their CEOs and creative and advertising agencies alike. The reduction in marketing budgets to 7.7% of overall company revenue signifies a need for strategic agility and innovation. As CMOs navigate the “era of less,” the adoption of AI and a focus on high-impact channels will be critical. Agencies must embrace these changes, fostering strong client relationships and investing in talent development to stay competitive.
The path forward involves leveraging AI for productivity gains, aligning investments with the most effective marketing channels, building resilient client partnerships, and nurturing a skilled workforce. By implementing these priorities, agencies can not only weather the current budgetary constraints but also position themselves for long-term success. And, their ability to adapt and innovate will distinguish the leaders from the laggards.
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