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73% expect COVID-19’s negative impacts to be short-lived: Gartner’s CMO Spend Survey

COVID-19 has driven ad spend down globally, and the economic impact of the coronavirus has resulted in major pullbacks from the travel and automotive sectors. But there are now strong signs of recovery. 

According to the findings of the Gartner’s Annual CMO Spend Survey Research 2020, “CMOs dismiss economic pessimism as 73% expect COVID-19’s near-term negative impacts to be short-lived.”

This research is based on Gartner’s 2020 CMO Spend Survey of 432 marketing executives in North America, the UK, France and Germany at companies with $500 million to $20 billion or more annual revenue.

The general consensus among CMOs is a positive outlook for business performance in the next 18-24 months, and they expect to increase investments across major channels and resource areas in 2021.

Marketers remain stoic in the face of adversity,” says Ewan McIntyre, VP analyst for Gartner for Marketers.

“A pattern of business behaviors”

So how are CMOs defying the prevailing economic pessimism? 

According to the report, “As unprecedented as the events of 2020 have been so far, previous points of crisis such as the Great Recession of 2008 have revealed a pattern of business behaviors: initial response, recovery and renewal,” as shown in the figure below.

So while budgets will take a cut in 2020, CMOs remain upbeat, expecting them to bounce back in 2021. In fact, the majority of CMOs responding to this year’s survey believe the post-COVID-19 economic curve will be V-shaped.

“A return to business-as-usual”

More than half (57%) of CMOs expect a return to business-as-usual performance in the next 18 to 24 months, and 38% actually expect a significant positive impact going forward, making it a staggering 95% consensus on a positive outcome.

And this outlook is prevalent across industries, be it retail, media, financial services, technology, or healthcare. 

Travel and hospitality, one of the most impacted industries, has a total 94% positive expectation. Media and High tech CMOs are the most confident, with both having a 98% positive outlook (either business as usual, or a significant positive impact).

“For many industries, the immediacy of the COVID-19 crisis meant that in the respond phase, budget cuts were focused on freeing up cash flow,” the report notes. “As we progress to the recover and renew phases, CFOs will turn their attention to how functions support profitability.”

Nevertheless, despite their positive outlooks, almost half of CMOs (44%) are facing midyear budget cuts in 2020 as a direct result of the COVID-19 pandemic. To reconcile their economic optimism with their budget limitations, CMOs continue to pursue relatively conservative growth strategies, with a sudden spike of interest in branding.

“Most vital strategic capability”

33% of CMOs now cite brand strategy as their most vital strategic capability, surpassing analytics in importance. Brand strategy has leap-frogged to the top of strategic priorities, from its lowly position near the bottom of the list in 2019, and the first time brand has surpassed other capabilities like analytics, personalization and marketing technology.

Why brand and why now? The report explains:

“When times are good you should advertise. When times are bad you must advertise.” A historical review of advertising during recessions found that most firms tend to cut back on paid media during a recession. However, 2009 research found that brands that continued to invest in advertising found their advertising’s effectiveness increased as the noise from other brands was silenced.

“Brand awareness and relevance in times of strife is more important than ever,” says McIntyre. “We are seeing successful brands take action that is authentically connected to their brand strategy and value proposition.”

Digital dominates, as organizations move online

Another area that has seen significant change year-over-year is digital, with the COVID-19 pandemic accelerating many organizations’ moves online. 

In 2020, investments in paid, owned and earned digital channels now account for almost 80% of multichannel budgets, with digital advertising and search advertising taking nearly a quarter (22%), social marketing (11.3%) and website (10.4%) topping the list. 

Marketers remain confident on the outlook for paid media in the next 12 months. 74% of CMOs report they will increase spending on digital advertising and 66% expect to increase spending on paid search. 

The research is available for download from Gartner here:
Annual CMO Spend Survey Research 2020