Where CMOs will spend in 2018

Changing consumer habits and the rise of digital advertising has made technology investment an integral part of marketing budgets. Brand competition is largely being fought in the realms of data analysis and analytics; marketing officers are now likely to be spending as much, if not more, on technology as the CIO.

Forrester has predicted that marketing technology budgets will increase by “double digits” this year, as companies start to invest more in areas such as automation, with a particular focus on mining data and using the ability to gain insights into consumer habits that used to be inconceivable.

“We are witnessing CMOs making greater investments in technology, and from a marketing-operations perspective, the technology framework for the future is transforming how business is being conducted,” says Wendy Johnstone, general manager for marketing and operations at Microsoft Asia Pacific. “Customer relationship management systems accelerate campaign creation and help marketers manage assets and resources to rapidly deliver messaging and content that resonates.”

“Cloud-based solutions are now empowering everyone to be more relevant and aligned to key customer initiatives,” Johnstone adds. Things like push apps, artificial intelligence, mixed reality and automation can help in providing more personalised services, enabling marketing and customer service teams to meet needs more effectively.”

Wendy Johnstone

In practical terms for Microsoft, it means continuing to invest in its Global Engagement Program (GEP), a platform that runs with marketing automation tools, spanning customer journeys from pre-sales to post-sales, giving them the ability to build deeper, more contextual relationships with customers.

Data dollars

Without question, data analytics is set to remain a key focal point for investment this year, both to sharpen pre-sales strategy and post-campaign analysis.

“Efficient use and analysis of data is essential for any modern marketer,” says Riku Vassinen, head of digital at J. Walter Thompson Singapore. “All companies are eventually turning into data companies and that requires that they integrate their data—internal, traditional research, new data sources—into consistent formats for use company-wide. Then companies need to draw conclusions about data and recommend actions that inform strategy and marketing.”

Meanwhile, the 2018 CMO Spend Survey from Gartner warns that a multichannel consumer journey requires marketing leaders to go further than channel performance metrics, and should instead employ advanced analytics to answer the total marketing ROI question.

Riku Vassinen

However, marketing budgets hit a plateau in 2017 after three years of growth, falling from 12.1% of company revenue in 2016 to 11.3% in 2017, marking a return to 2015 levels. In the last year, the percentage of the CMO budget that was allocated towards marketing technology has dropped from 27% of the CMO’s budget to 22% of his or her budget in 2017, as CMOs pull back on 2016’s high spending commitments amid concerns over marketing's capability to acquire and manage technology effectively.

As Gartner points out, “marketing budgets are tied to business performance, and 2017 has been a year of significant macro-environmental upheaval, in terms of both global politics and natural disasters.” This could mean marketing investments in technology face higher scrutiny.

“Data and analytics will continue to be the focus of investments, but in many ways the investment has not yet paid off,” says Vassinen. “Turning data into actionable insights should be the main focus for data investment, but as companies have invested in data specialists and new tools, the data usage has not necessarily been disseminated across the organisation. Many companies are still a long way from having a proper insights engine that benefits the whole organisation.”

Yet Vassinen contends that the ability to turn insight into action is the most important skill for marketing leaders these days.

Digital ad spend gains despite red flags

The ability to precisely target and measure results continues to steer a greater proportion of marketing budgets toward digital.

The 2018 Gartner CMO survey, based on interviews with 353 marketing executives at companies with more than $250 million in annual revenue, reveals two-thirds of CMOs globally plan to continue to increase investment in digital advertising.

This, of course, is no real surprise and reflects changing media consumption habits, a trend particularly true across Asia.  If consumers are digital-minded, so must the marketing be. But if CMOs are to be the biggest technology spenders in the future, where will they be investing to maximise that digital ad spend? 

According to Gartner’s research, 61% plan to increase investment in their websites, and another 59% of CMOs are planning to increase investment in mobile. CMOs also showed a strong and continued commitment to social marketing, with 64% planning to boost budgets in these areas.

“The area that will most be capturing marketing spend and attention in 2018 will be social media, particularly newer stuff like Instagram, Snapchat and KOLs, who are quite active in the marketplace now,” says Raymond Ho, brand management and digital marketing director of Hutchison Telecom Hong Kong and chairman of the Hong Kong Advertisers’ Association.

“Definitely in the past two years there has been a rush towards digital at the expense of offline advertising—down the road, I would imagine a lot more crossing of sectors like online-offline or 360 degrees, rather than just investment in online,” says Ho, who predicts that there will be a rebalancing between heady investments in marketing tech and more balanced, considered spending across a marketing portfolio.

Forrester’s report argues that it will be tougher to justify digital advertising in the future, due to these issues with transparency and effectiveness of digital advertising. A cut in marketing spend could force CMOs to think more strategically about demonstrating return on investment. Only 15% of respondents in Gartner’s study expected a significant increase in budget for 2018; 52% anticipated a slight increase, while the remaining third were braced for frozen or cut budgets.

The P&G Effect

The biggest advertiser in the world, Procter & Gamble, has had a significant impact on digital ad budgets after it announced it would cut marketing spend by $2 billion in the next five years. The packaged-goods giant reported that it cut approximately $100 million to $140 million in digital advertising spend in Q1 2017 as CMO Marc Pritchard lashed out at the "fraudulent at worst, murky at best" world or digital advertising. CFO Jon Moeller said its investments in digital advertising had been ‘largely ineffective’, and that cutting back on digital ads hadn’t impacted on their growth rate.

P&G CMO Marc Pritchard

P&G’s rival Unilever has also cut down on its marketing to improve margins, but is still looking to YouTube stars and beauty bloggers to push its products. Earlier this year, it said it planned to cut the number of ads it created by 30% and reduce the number of creative agencies it works with by half.

These cuts by brands have also affected agencies; Japan-based advertising company Dentsu lowered its full-year net sales guidance by 1.5% earlier this month, blaming ad account reviews at consumer-goods firms.

However, certain regions will continue to see increased spend, to reflect the evolving face of marketing.

In many Asian markets, particularly less developed ones, budgets are bucking global trends for increased caution. In parts of Southeast Asia, where digital penetration is still low, marketers see potential for growth, not budget cutting. Digital ad spending in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam is poised to swell thanks to heavy mobile investment across the region, according to eMarketer research this year.

All six countries will see digital ad expenditures increase by double digits in 2018, the group predicts, and mobile ad spending in these markets will more than double by 2021, surpassing $2.20 billion and accounting for nearly 69% of digital ad expenditures by 2021.

In Singapore, which is more closely linked to global trends, overall media growth has slowed slightly in recent years due to weak consumer spending, and as the economy recovers, eMarketer expects to see increased outlays on digital, which will account for almost a quarter of total ad spend in the country this year. By 2021, digital ad expenditures in Singapore will total roughly $520 million, with mobile accounting for 82% of all digital spend, as companies invest in mobile marking technology.

As CMOs survey the landscape, it’s clear that previous budget increases have come with weighty expectations, and some of these have yet to be met. In 2018, CEOs are taking a more critical eye on digital marketing spending, and CMOs face pressure to show that their investments have brought a return on investment and can grow the business.

“Today buyers have never been more empowered and informed, and marketing to them has never been more complex,” concludes Johnstone. “Marketers need to be ready to align to the next social channel or digital trend. The need for modern marketers who have a 360 degree view of the customer hasn't changed.”