Marketing budgets have fallen to their lowest recorded level, dropping to 6.4 percent of company revenue in 2021 from 11 percent in 2020, according to research and advisory firm Gartner, Inc. The finding comes from its annual Gartner CMO Spend Survey, for which it surveyed 400 CMO and marketing leaders in North America, the UK, France and Germany from March 2021 through May 2021.

“Despite facing in-year budget cuts in 2020 due to the pandemic, most CMOs expected budgets to bounce back in 2021. This budgetary optimism was misplaced, as marketing budgets have fallen to their lowest level in the history of Gartner’s CMO Spend Survey,” says Ewan McIntyre, co-chief of research and vice president analyst in the Gartner for Marketers practice. “However, these cuts have been a slow burn over the course of the last year, where many marketing budgets have not recovered what was originally lost.”

The annual survey found that cuts to marketing budgets were made at organizations of all sizes, and no industry it tracked achieved a double-digit budget in 2021. Travel and hospitality, manufacturing and tech product companies experienced the greatest cuts in 2021.

Consumer products and goods (CPG) companies reported the strongest 2021 marketing budgets at 8.3 percent of company revenue. Large enterprises were hit the hardest—companies with revenue of more than $2 billion reported the lowest average marketing budget of just 5.7 percent. On the other hand, companies with revenue of under $500 million reported the highest allocation to marketing with an average budget of 8.6 percent of revenue.

Gartner’s research shows CMOs have shifted spending commitments across their channels and programs, with pure-play digital channels—owned, paid and earned—dominating those priorities and accounting for 72.2 percent of the total marketing budget. When looking at the largest resource allocation—agencies, media, labor and paid media—agency spend continues to decline. McIntyre adds, “Albeit a small dip from 23.7 percent in 2020 to 23 percent in 2021, this continual change indicates significant in-housing activity, as CMOs reimagine the capabilities that can be supported by their internal teams.”

CMOs report that 29 percent of work previously carried out by agencies has moved in-house in just the last 12-months alone. The focus of in-housing is changing as well—with brand strategy, innovation and technology, and marketing strategy development making up the top three capabilities areas CMOs are moving to internal teams. Meanwhile, marketing technology (martech) continues to dominate, taking up 26.6 percent of the total budget.

2020 and 2021 also saw drastic changes to customer buying journeys, both B2C and B2B alike. Gartner notes that these shifts are forcing even digital late-comers to accept the inevitable move to online channels. When looking at budget allocation by programs and operational areas, CMOs report digital commerce makes up 12.3 percent of the total budget. Likewise, marketing operations and brand strategy make up 11.9 percent and 11.3 percent of the total budget.

However, while marketing analytics still commands 11 percent of the total budget, it has continuously dropped in prioritization, now in the fourth position in 2021. McIntyre says, “CMOs continue to invest in marketing data and analytics, however, for many, the results have failed to live up to expectations. Given recent and upcoming regulations and changes in data collection, we expect this investment area to continue to be a strategically important capability, but also to continue to fluctuate until uncertainties subside.”