Research from Gartner shows that businesses are apportioning an increasing amount of their marketing budgets to martech.
Data published in The CMO Spend Survey 2018-2019 shows that, on average, marketing technology now accounts for almost one-third of marketing budgets. This proportion has grown more than 30% in the past year.
Gartner’s survey analyzed the budgets of 621 marketing executives in North America and the UK at companies with $500 million to $10 billion or more in annual revenue.
So what is driving this growth? And what are the implications for businesses who find themselves with a growing number of technologies at their disposal?
Martech diverting budget from other areas
Between 2018 and 2019, the average budget allocation for martech among US and UK businesses grew from 22% to 29%.
Subsequently, other areas of marketing are seeing a decline in the proportion of budget being dedicated to them.
- Labor has dropped from 27% to 24%.
- Paid media has fallen from 25% to 23%.
- Agencies are receiving a smaller slice of the pie too – also dropping from 25% to 23%.
SaaS and in-house marketing/analytics applications are driving growth
Closer scrutiny on martech spends reveals that marketing and analytics software is a key driver for budget allocation in this area.
In total, 40% of martech budgets goes to marketing and analytics technologies which are delivered either as Software as a Service (SaaS) or on-premise applications.
When businesses were asked what capabilities they considered most vital for delivering their marketing strategy, analytics came out on top.
40% of respondents see marketing and customer analytics as being the most important area of focus for the next 18 months.
Companies also cite the acquisition and use of martech to be of significance over the next year and a half.
34% predict marketing technologies will be vital to them. So it might be fair to assume budget allocation will continue growing in this area, at least in the short term.
The CMO Spend Survey 2018-2019 also highlights a number of other findings when it comes to marketing budget habits across organizations.
1. Overall, marketing budgets have leveled off
Throughout 2017 and 2018 respectively, 11.3% and 11.2% of company revenue were spent on marketing. This is a drop from 12.3% in 2016.
2. One in every $6 goes on innovation
More than nine percent of respondents consider innovation to be vital over the next 18 months. And 63% expect budgets in this area to increase in 2019.
3. Awareness is a primary metric ahead of CLTV and ROI
12% of CMOs across North America and the UK say awareness is the most important metric to inform their marketing strategy going forward.
For comparison, 7% speak the same of return on investment, and just 1% consider customer lifetime value (CLTV) measures to be as vital.
Recommendations for companies investing in martech
Businesses are clearly seeing value in the ever-increasing array of marketing technologies available to them.
Gartner offers some clear recommendations for getting the most from martech. Many companies try to strike the balance in tech investments when at the same time being careful not to neglect other areas such as staffing and talent.
1. Ensure martech budgets are regularly audited
Perhaps the key bit of advice for martech implementation going forward is to ensure that the spend in this area is regularly audited. Companies should be assessing the technologies they currently have in place and should consider stripping away tools that aren’t being used effectively or are out of date.
Additionally, organizations often have a clear idea of the start-up investment for new technologies — but lose sight of the costs incurred from their utilization, the internal and external resources associated with them, as well as the processes and talent needed to support them.
2. Directly link ROI in marketing performance metrics
Another key recommendation addresses the underuse of financial measures as a marketing performance metric. While analytics technology is clearly perceived to be vital among North American and UK businesses, too often it is not being used to link marketing performance with ROI.
Awareness, as a metric, certainly has value to all types of businesses. But as Gartner states, “marketers must not underplay ROI’s strategic importance within the enterprise”. While ROI is sometimes too complex to measure for fast-growing companies, a robust analytics provision, and the necessary staffing can ensure the data available to them is processed adequately and incorporated effectively into future strategy.
This enhanced understanding of ROI serves not only to improve marketing techniques and processes but can offer a better insight into the value of existing and new technologies themselves.