Marketing budgets looked very different for many CMOs at the beginning of 2020 than they do now. In fact, according to Gartner’s CMO Spend Survey 2020, pre-COVID-19 marketing budgets held their ground year-over-year, making up 11% of overall company revenue. But following the COVID-19 outbreak everything changed. More than 44% of CMOs reported mid-year budget cuts as a result of the pandemic, and nearly 11% of that group expect their budgets to face cuts of more than 15%.
Despite this, an astonishing 73% of CMOs expect COVID-19’s negative impact to be short-lived, with a positive outlook for business performance in the next 18-24 months. This optimism, however, is not shared by all members of the C-suite.
A Gartner poll reveals nearly 60% of CFOs are building scenario plans that include a second wave of the pandemic. In addition, CFOs report a strong connection between COVID-19 and challenges with the macro-environment, revenue loss and demand.
With many of their C-suite colleagues planning for a ‘U-shaped’ or ‘W-shaped’ recovery, CMOs must be more vigilant in their cost optimization.
Plan for future disruption
More than half (57%) of CMOs believe that performance will return to near-normal in the next 18-24 months – a strong, perhaps overly optimistic ambition in the face of significant turmoil and uncertainty. But confidence varies in specific industries.
Only 22% of respondents in travel and hospitality feel that there will be a marked, or significant positive impact. This is a reflection of the longer-term impact in this sector, with major airlines such as British Airways and aircraft manufacturers stating demand for air travel will not return to pre-COVID-19 levels for up to five years.
Previous points of crisis such as the Great Recession of 2008 have revealed a pattern of business behaviours: initial response, recovery and renewal. As the world progress into the ‘recover’ and ‘renew’ phases of the pandemic, CFOs will turn their attention to profitability. Marketing has the dubious honour of topping the list of functions that finance will look to for trimming expenses even further. As a result, CMOs should plan for future budgetary pressures now, rather than gamble on budgets bouncing back.
To ensure marketing’s expectations do not fall out of step with business realities, leaders must take a more collaborative and agile approach to budgeting and planning.
Collaborate on scenario plans
Because there are no existing playbooks with canned strategic responses for a global event of this kind, CMOs must balance their optimism with pragmatism. To do this, CMOs should collaborate to build cross-functional scenario plans for a collective view on the opportunities and risks in uncertain markets. Leaders must identify the costs to eliminate, essential costs to shield and costs that deliver greater efficiency and ROI.
Focus on flexibility and adaptability
Volatility and uncertainty will persist in the year ahead as markets shift from the “recovery” to “renewal” phases of the pandemic. As a result, CMOs must focus on flexible and adaptive plans that take into account this instability. Leverage the tenets of agile methodology to develop plans that can respond quickly to market uncertainties.
Traditional planning moves too slowly to respond to change and manage uncertainty, meaning plans are outdated before they begin. CMOs that adopt agile methodologies will be better equipped to react to emerging opportunities and threats.
To download The Annual CMO Spend Survey 2020 please head to the Gartner website.
