Marketing budgets have been through a lot in the past few years! From economic uncertainty to profound changes caused by the pandemic and Artificial Intelligence, CMOs have had to completely rethink how they spend their budgets many times. Marketing departments have been under pressure in many industries to deliver more with less and 2023 seems to have been the culminating point in those years of change.
We’ve explored data from 2023 to understand how marketing budgets have shifted, which channels have grown and which have shrunk to help you strengthen your own digital marketing strategy.
Media Spend in 2023
The UK economy has been bumpy in 2023 and towards the end of the year, slipped into a technical recession which is when an economy experiences two consecutive quarters of negative growth. But what impact, if any, has this had on the way that marketing budgets were managed?
UK Ad Spend Grew by 6%
Interestingly in terms of advertising spend, according to AA / WARC Expenditure Report 2023, UK ad spend is estimated to have grown 6.4% in 2023 to £37.0bn – final figures will be published in April.
A further breakdown of their findings is provided in the table below:
Source: Advertising Association / WARC Expenditure Report, January 2024
The table provides data which shows the percentage change of spend with Q3, 9 month and full year estimations, including 2024 forecasts. This data is based on survey responses from the UK media.
Search advertising (e.g., Google Ads) experienced high growth with 23.7% Q3 2023 year-on-year and an estimated 11.3% increase year-on-year for the full year of 2023. This demonstrates investment in digital marketing despite the economic turn, a point which is furthered by investments in online display media which recorded a 24.8% Q3 2023 year-on-year increase. This increase could also be a symptom of advertising costs rising, meaning marketers have to increase their budget if they want to stay in the game.
Search advertising tends to be used by marketers to get leads or revenue quickly which could explain the higher investment in times of economic difficulty. However, we have seen increased competition and costs across paid advertising platforms which can sometimes make it harder to get good ROI (Return on Investment) from your campaigns. The data here doesn’t say whether the investment actually worked for these companies so it’s vital to keep track of performance over time and reassess tactics accordingly.
Explore Search Advertising tips in our Knowledge Hub:
- Everything You Need to Know about Paid Advertising
- How to Ensure your Google Ads are Effective (video)
Social Advertising Spend Grew by 53%
Source: 2023 Gartner CMO Strategy and Spend Survey
The 2023 Gartner CMO Strategy and Spend Survey recorded the highest changes in investment for search advertising with some CMOs increasing it by 40% when others decreased it by 26%. It looks like search was dropped for social advertising with a huge increased allocation of 53%, closely followed by digital video advertising and influencer marketing.
This highlights our earlier comment around search advertising’s efficiency for marketers. Although search ads can be great at bringing qualified leads, marketers are seeing less cost efficiency meaning they have to look elsewhere to generate the leads and revenue they need.
Platforms like LinkedIn for B2B and TikTok for B2C are increasingly popular amongst marketers. As these are heavily focused on video, it’s no surprise that the investment followed in video and influencer marketing. Consumers have clearly shown they favour videos and authenticity, and marketers are responding accordingly.
Although Search advertising did not come out as the top priority in this survey, 40% increasing investment indicates that this area of marketing is still an important consideration for senior leaders, and they haven’t completely abandoned it. Combined with the forecast predictions for 2024 in the AA / WARC Expenditure Report 2023, it may imply that this trend will continue into 2024.
Events are Making a Comeback
Source: 2023 Gartner CMO Strategy and Spend Survey
According to Gartner, event marketing has become the top offline channel investment, with 16.3% of budgets allocated to this channel.
This is further strengthened by the analysis by IPA in their Q4 2023 IPA Bellwether Report:
"Events was the best-performing sub-category of marketing in the final quarter, recording a strongly positive net balance of +15.9%, its highest in a year-and-a-half (up from +5.9% in Q3)."
After a decline during the pandemic, events have begun to recover as indicated through this report, and the amount of promotion we have been observing first-hand as marketeers! As a sub-category of marketing, events can be a powerful lead generation tool when combined with digital tactics.
If attending events is part of your awareness and lead gen strategies, don’t forget to plan digital activities alongside the events to maximise their value. This could include email nurture flows to retain engagement and convert customers, gated content to encourage data collection and personalisation, along with appropriate storing and use of data gathered in your tech stack.
Prioritising technology came to the forefront in the 2023 Gartner CMO Spend and Strategy Survey where 63% plan to grow investment in tech. Meaning, if you haven’t already, this is an important area to assess in your strategy.
To ensure any event activity is effective, it’s essential to get your marketing tech in order. Find out how to audit your tech-stack in our Digital Marketing Answered video episode.
The Approaches to Budgets During the Recession
In this Advertising Association’s article, Stephen Woodford, CEO, Advertising Association, said while referring to the the AA / WARC Expenditure Report 2023:
"The Q3 increase in 2023 and 2024 forecast upgrade demonstrate advertisers’ continued commitment to investing in their brands, despite the lack of overall growth and stubborn inflationary pressures in the UK economy."
It is evident that businesses have been and are still investing in their digital marketing strategies, and so it is important to continue to dedicate budget to remain competitive and, as mentioned by Forbes, not doing so during the recession could become a costly mistake:
"Many companies retreat from the market during a recession, reducing advertising and marketing efforts. This opens up opportunities for those willing to maintain or even increase their presence."
This point is also addressed in the Nielsen’s 2023 Annual Marketing Report, with one of the key insights focusing on the need for marketing budgets to increase, with 64% of global marketers expecting advertising budgets to grow:
Source: Nielsen 2023 Annual Marketing Report
Read our blog post about Why Investing In A Recession Helps Businesses Survive and Thrive.
Marketing Budget Compared with Total Business Revenue
The sources analysed so far demonstrate a reallocation in budget spend for different areas of marketing (specifically increasing the digital share) comparing 2022 spend to 2023. However, how does this shape up when looking at total business revenue?
Source: 2023 Gartner CMO Strategy and Spend Survey
This graph illustrates the change of marketing budget as a percentage of total revenue over time, beginning with 2016 and finishing in 2023. Marketing spend had a dramatic decline following the Covid-19 Global Pandemic, and as indicated through this graph, budgets are still in recovery.
Marketing budget was 9.1% of total revenue in 2023, which is the lowest it has been for 7 years (excluding the immediate impact of the pandemic). This again highlights that budgets are being squeezed, and so marketers are investing what they can in digital to generate revenue. It seems they're reallocating a lot of budget towards advertising, maybe in an attempt to get leads or revenue faster in this increasingly pressured landscape.
Although this can be a good strategy, it's always better to complement it with other channels such as organic tactics that will be more rewarding in the long term. Investing solely in paid advertising can be risky business as the platforms are very sensitive to competition and rules can change quickly (features keep disappearing and changing in Google and Facebook). Organic isn't immune to this with Google algorithm changes but tends to be a more sustainable way of getting revenue with the right strategy and investment.
How to Make Your Marketing Budget Stretch Further?
This is a question that many businesses face and the answer will be unique to each individual company. Your strategy will depend on your audience, your business goals, your industry, the maturity of your business and other factors. However, it’s clear investing in digital marketing is still critical for any business, even when budgets are tight. Watch our Digital Marketing Answered about Squeezing the Max Out Of Your Marketing Budget for some tips.
Most of the companies we talk to are looking to stretch their budget further and gain efficiencies in their digital activities. From optimising their tech stack and data collection, to including more automation and personalisation throughout their activities, maximising their ad spend, or beating competitors in search results, we’ve devised countless successful strategies to help our clients win.
Let us help you maximise your digital marketing activity in 2024 for high impact. Contact the Innovation Visual team.
