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 Channel Futures

Strategy


martech budget

Zero One: Marketing Tech Spending Slips as Companies Demand Results

  • Written by Tom Kaneshige
  • November 28, 2017
Marketing tech budgets fell 15 percent as CMOs struggled with their new role as tech buyer. Next year, companies will want to see concrete results from their tech investments.

For marketing tech aficionados, the year started off with a bang. In spring, Chiefmartec’s Scott Brinker released his popular annual landscape graphic showing that the number of marketing tech vendors had grown by about 40 percent to more than 5,000.

But the good vibes didn’t last long.

This fall, a Gartner survey of CMOs found that marketing tech spending had fallen by 15 percent amid an overall slowdown in marketing budget growth. Last year, marketing tech spending took up more than a quarter of the total marketing budget, 27 percent, but fell to 22 percent this year.

The overall marketing budget slowdown happened for many reasons, but the slide in marketing tech spending is particularly alarming. There are signs that the emerging line-of-business tech buyer, in this case, the CMO, isn’t ready to take the reins of technology, and loss of credibility looms.

“The challenge is that CMOs’ ascent to their lofty technology role has been swift, and the learning curve has been intense,” say Gartner analysts Ewan McIntyre and Anna Maria Virzi in the report CMO Spend Survey: 2017-1018. “Only half of CMOs currently regard themselves as effective at acquiring and managing tech.”

Smitten with rosy marketing tech vendor pitches and lacking the discipline and due diligence of the CIO, many CMOs bought too much tech gear too quickly. They simply signed on the dotted line of a marketing tech cloud subscription without considering the overall technology strategy.

In what seems painfully obvious today, the fallout has been messy. Lots of marketing tech tools aren’t being used properly or at all, in part because the marketing department underestimated the digital skills needed to use them. Lack of architectural oversight and integration has led to the dreaded Frankenstack. Duplication abounds, and churn is on the horizon.

“Furthermore, poorly selected, underperforming or underused marketing technology forces marketing teams and agencies to rely on manual processes, which hurts marketing efficiency and effectiveness,” McIntyre and Virzi say. “Significant investments need to prove business value, or else they end up being considered costly vanity projects.”

At marketing tech events, CMOs warned about falling for “shiny toys.” McDonalds, for instance, built virtual reality goggles for stepping into a McDonald’s Happy Meal box. But the real marketing tech win was offering pedestrian deals – buy five beverages, get one free – over a mobile app.

CMOs also have been busy trying to seize the role of custodian of the customer experience, or CX. While it’s true that companies compete heavily on the battlefield of customer experience, it’s still an area of unsure footing.

CMOs haven’t had a lot of success. A Forrester survey found that nine out of 10 companies are still trying to get customer experience basics right. “They’re still looking for the light switch,” says Forrester analyst Rick Parrish.

Related: Zero One: The Sorry State of Customer Experience

“There’s evidence that CMOs may have become distracted – either by a heavy focus on operational and tactical measures of performance, or by diverting their gaze toward large, cross-functional initiatives such as CX programs that have yet to provide hard economic benefits to the enterprise,” McIntyre and Virzi say.

All of this, of course, negatively impacts future spending on marketing tech.

Yet this can also help marketing tech mature beyond its troubled youth. Despite the budget squeeze, both Forrester and Gartner expect growth in spending on certain marketing tech next year. This time around, there will be a renewed focus on marketing tech that moves the needle.

Forrester, for instance, anticipates strong spending in the following marketing tech areas for 2018: customer journey mapping, social selling, account-based marketing, post-sale selling, data management, predictive marketing analytics, and artificial intelligence.

In Gartner’s CMO survey, marketing analytics carved out a large share – 9.2 percent – of the total marketing budget this year, leaping over website, digital commerce and digital advertising. Sixty-two percent of CMOs plan to increase marketing analytics budgets next year.

“The emphasis on marketing analytics comes as marketing leaders must eke every cent out of existing programs and refocus on ROI (return on investment) by centering efforts on the right customers,” McIntyre and Virzi say.

Other marketing tech areas with increased spending in the Gartner survey include: social marketing, websites, mobile, and innovation.

With the latter, Gartner found that marketing innovation seems to have been spared from budget pressures, continuing to be 10 percent of the total marketing budget. The value of marketing in the digital economy, along with marketing’s ability to innovate, remains high.

While the days of willy-nilly spending appear to be over, sound budgeting practices and fiscal maturity seem to be in vogue. This means CMOs need to learn to speak the language of the CFO. CMOs with profit-and-loss responsibilities already do, and they get 50 percent higher marketing budgets, Gartner says.

Tom Kaneshige writes the Zero One blog covering digital transformation, AI, marketing tech and the Internet of Things for line-of-business executives. He is based in Silicon Valley. You can reach him at [email protected].

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