What’s Up With Martech Spending Madness for CMOs?
- Martech spending wins and struggles. While 83% of CMOs anticipate increased martech budgets in 2024, there’s a current trend of budget constraints, with 50% citing them as a barrier to martech investment.
- Skills and knowledge over budget.More than budget constraints, a lack of proper skillsets and understanding of technology appears to be a significant roadblock to leveraging martech effectively.
- Data and AI as central pillars. Data management is foundational, with 76% of CMOs emphasizing its role in martech effectiveness. Additionally, there’s a strong focus on AI, with 73% of CMOs seeing its potential to enhance marketing efficiency and 47% planning AI-related initiatives.
Analysts, reporters and marketers alike all wonder the same thing: What’s on the spending agenda for chief marketing officers (CMOs).
And if you like uniform answers, you’ve come to the wrong party.
The latest report to pin down the CMO’s martech spending habits yields some good news if you’re a marketing technology vendor: CMOs want to spend money on your technology. This comes from marketing technology research LXA, which finds in its new State of Martech and Marketing Operations 2023/24 report that brands will spend more on marketing technology in the next 12 months.
Specifically, 83% of CMOs expect martech budgets to increase in 2024. “Despite this, 50% of CMOs still see budget constraints as a barrier to martech investment — this may reflect vendor price increase, or perhaps that CMOs would always like a little more budget,” according to report researchers.
A Tale of Many Martech Spending Messages for CMOs
It’s interesting because this flies in the face of Gartner’s May 2023 report on marketing spending, which found 71% of CMOs said they lack the budget to fully execute their strategy in 2023.
“Suppressed budgets, increasing costs and lower productivity are squeezing CMOs’ spending power,” Ewan McIntyre, chief of research and VP analyst in the Gartner Marketing practice, said in the report from May. “As volatility becomes the new normal, many CMOs are pricing disruption into their 2023 plans.”
And while the LXA report finds CMOs increasing marketing technology spend in 2024, three-quarters of marketers will need to cut martech spend in 2023 to deliver better ROI. At the same time, the highest reported investment increase across all major marketing resources by CMOs this year goes toward marketing technology, while the largest decrease goes to labor.
Able to digest all those fluid trends and reports? Neither are we.
Related Article: Are You Measuring Your Martech Correctly? Really?
What Stands in the Way of Martech Success?
Here’s one way to look at this: CMOs and marketing leaders, despite the sporadic reports on marketing technology spending, still see marketing technology as crucial to delivering on marketing campaigns and customer experience.
“The biggest changes to the role of the marketing leader is that it is increasingly important for marketing leaders to have a deep understanding of the technology stack, both strategically and functionally,” a survey respondent told CMSWire researchers in The State of the CMO: Insights from the 2023 Annual Chief Marketing Officer Survey. “The heavy reliance on martech to improve CX and move the revenue needle means that it is no longer possible for a ‘leader’ from another part of the company to take over a marketing leadership role and be effective. The practical understanding and experience of the tools and associated processes is crucial.”
Yet, more than half (54%) of beginner brands and marketing leaders told CMSWire researchers they find a lack of budget as a roadblock to improving digital customer experiences — versus only 31% of intermediate and 29% of advanced brands.
Maybe it’s not money standing in the way of marketing technology bliss but rather skillsets and knowledge. According to the CMSWire report, “As the world changes, these leaders use their updated skills and technology to better solve contemporary problems, bolstering their identity as a leader.”
And let’s not forget: Technology isn’t the only thing that will get CMOs and other marketing leaders to their desired outcomes for their brands. In fact, more than half (52%) of respondents say that creative thinking is an essential competency for marketing leaders — far more than the next most common answers, including strategic management (30%), leadership skills (28%) and executive leadership (28%).
CMOs are focusing on upskilling and reskilling in-house teams due to the difficulty in recruiting talent with the necessary skills: According to the LXA report, 63% of CMOs plan to increase the size of marketing operations teams in the next 12 months. There’s a significant focus on improving skills in AI and customer experience design.
What’s Driving Martech Spend?
But money does matter. It moves things.
The LXA report this week found that compared to 2022, marketing budgets have shifted significantly. Economic challenges have prompted companies to reduce headcount while maintaining or increasing martech investment. Martech now accounts for 30% of marketing budgets, up from 24% in 2022, while labor costs have decreased from 35% to 28%. Despite budget constraints being a barrier for 50% of CMOs, 83% expect martech budgets to increase in 2024.
What are the drivers of martech spend? Key drivers for changes in martech spend include the desire to enhance customer experience and engagement (more than 60%), expansion into new markets or customer segments (more than 50%) and the marketing team’s strategic goals and objectives (just more than 50%). Those were the top three, and also cited were changing customer behaviors, the need for advanced analytics, AI-driven marketing capabilities and the demand for data-driven marketing insights. About 70% of CMOs claim they can accurately measure the effectiveness of martech investments, an increase from 62% in 2022.
There is substantial interest among CMOs in AI, with 73% believing AI will improve marketing efficiency and effectiveness over the next two years; 47% of CMOs are piloting or looking to pilot initiatives around AI and machine learning (ML) in the next 24 months.
Related Article: Economic Downturn Ahead: 4 Ways to Trim Your Marketing Stack
Data Is the Martech Glue; Strategic Alignment Makes All the Difference
The report also found:
- Data management and governance foundational. 76% of CMOs view data as foundational to the effectiveness of the marketing stack. Investments are being made in data governance tools for privacy and compliance, and in Customer Data Platforms (CDPs) to centralize and unify customer data.
- Emerging technologies like 5G/6G on the radar. CMOs are exploring various emerging technologies, with a significant focus on 5G/6G for better mobile experiences and AI/ML initiatives. Cybersecurity and digital ethics are a focus for 53% of CMOs due to evolving data legislation globally.
- Strategic alignment and skill development matters. Before acquiring new technology, it’s crucial to ensure the necessary skills and personnel are in place. Technology investments should align with specific business needs and goals, and there should be a focus on training and skill development to maximize the value of the marketing stack.
- Challenges and investment drivers: 50% of CMOs see budget constraints as a barrier to martech investment, possibly due to increased tech costs or competing priorities.
“With martech maturity levels low for many organizations, and tools often failing to match expectations, it’s encouraging that many CMOs see martech strategy and areas such as project management as a key focus for improvement,” LXA researchers found. “Establishing the right strategy and planning framework is the bedrock for enabling effective innovation in marketing.”