The problem with crashes or major pull backs is that you normally do not foresee them or prepare for them adequately. Even after the event occurs, it’s only historical hindsight that puts them into perspective. Now unlike many other articles you might read, even some written by me, I’m not talking about cryptocurrencies. I am talking about marketing budgets. For the past three years marketing budgets as a proportion of company revenues have been increasing. Sometimes they increased slightly, other times they increased heavily. However, the one fact remained the same, they increased.
“Only 14% of respondents surveyed in last year’s CMO Spend survey anticipated a cut in 2017.”
From the battles of Waterloo, to San Jacinto, to Vicksburg, to Normandy, the losers did not realize that their high water mark had come and passed and while comparing the French Empire, Empire of Mexico, Confederate States of America, and Third Reich to what happened and is happening to marketing budgets is an egregious use of an analogy, for this veteran and one time historian, it is a good visual, because 2017 was a terrible year for marketing budgets.
Sure, I know what you’re thinking, a 7% fall in marketing budgets does not sound like a catastrophic fall. However, when you take into account that US corporate profits increased by 8% from October 2016 to October 2017, what you are really seeing is a sizable decrease in marketing budgets.
This decrease in marketing budgets is especially acute for marketing technology companies. Depending on the size and stage of the company, a shrinking market size is not just detrimental to their business models, but can be fatal. While this snowball did not completely roll down the hill to all marketing technology companies in 2017, the significant pullback in Martech spending will impact all companies in 2018. Gartner’s “CMO Spend Survey 2017-2018”.
“Martech spending has fallen by 15%.”
Furthermore, the inability of both marketing technology companies and marketers to utilize advanced Reach-Cost-Quality (RCQ) models has negatively impacted media investment. Thereby resulting in CMO’s increasing spends on agencies while reducing their own spends on internal labor. Even after the reduction in internal labor spends, CMO’s are still deploying slightly over half of their budgets on talent resources.
Now all is not doom and gloom for those of us in the marketing sector. CMOs and marketers have received a mandate to “show their financial management credentials, proving they can assume accountability for business performance”. Companies, like Abraxas Technology, who rely on data, to provide marketing and advertising spend ROI, are positioned to reap the rewards of this re-focusing of priorities. As marketing budgets shrink, it will become more important to provide models and reports that rely heavily on data that is relatable to business priorities. No longer is it acceptable for marketers to respond with the age old adage
“Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”
If you’re tired of hearing a version of this response from your marketing, agency, or media buying team contact us over at Abraxas Technology to learn how we can help.
Joshua Lawton is the COO and Co-Founder of Abraxas Technology.
Follow us on Twitter @Abraxas_Tech
Gartner: “CMO SPEND SURVEY 2017-2018: BUDGETS RECEDE AMID DEMAND FOR RESULTS”