As we wrap up the first quarter of 2023, we are beginning to see key trends emerge in marketing spending. Inflation concerns have been top of mind for most business leaders, influencing their spending decisions. However, it’s not all doom and gloom as we look toward the economy’s future. The International Monetary Fund (IMF) predicts that global growth will slow from 3.4% in 2022 to 2.9% in 2023 but will rebound to 3.1% in 2024.
Additionally, many savvy businesses have learned from the past. When brands slash their marketing spend during a recession, it costs them more in the long run. Companies that continue to invest in brand marketing see a high return on their investment that lasts long past an economic downturn. These are the brands that come out on the other side as victors.
While businesses across industries feel the strain of inflation at varying levels, most leaders continue to invest in expanding their market reach and retaining existing customers. Marketing continues to hold a central focus in overall budgeting.
As you plan the next three-quarters of your business’ marketing spending, it can be helpful to understand where your competition is planning to head in 2023. Let’s start with a review of the past year to gain a big-picture view of key upcoming marketing trends.
A Review of 2022
Gartner’s 2022 annual review of “How CMOs Are Spending Marketing Budgets” revealed numerous critical insights into where most of the marketing dollars were invested last year.
For starters, they point out that marketing budgets in 2022 continued to climb back toward pre-pandemic levels from 6.4% of company revenue in 2021 to 9.5% in 2022. This trend showcases that while the pandemic took a toll on companies, optimism for the future remains high.
Breaking down where most of these budgets were spent, digital channels accounted for 56% of marketing spend. While digital is still retaining the majority of marketing spending — a clear reflection of the pandemic-driven shift to online strategies — Chief Marketing Operators (CMOs) are beginning to shift away from digital-first to hybrid multichannel spending. This clearly indicates the increasing return of customers to in-store visits. During 2022, CMOs reported that offline channels now accounted for almost half their budget.
Events and sponsorships also saw an increasing focus in 2022. While these were logical areas to cut budgets during the pandemic, both channels rebounded. Events accounted for almost one-fifth of total offline marketing budgets in 2022.
Diving deeper into digital channels, Gartner reports that paid digital media accounted for more than 60% of total digital spending between paid, owned, and earned channels. Topping the list of paid digital media was social advertising. Following closely behind was paid search and digital display.
Predictions and Trends for 2023 Marketing Budgets
As we transition into a new year, marketing leaders are taking careful focus on how their limited budgets are spent. Consumers are tightening their wallets and becoming pickier when choosing where to do business. This makes it more challenging than ever to capture the attention of target audiences.
In response to this competitive landscape, the following are seven key areas in which businesses plan to increase their spending and centralize their focus.
1: Content Is Continuing as a Central Theme
For decades marketers have touted the phrase “content is king.” Content has played a central role in reaching customers for numerous reasons. In a digital world, content has been the backbone of online strategies, helping reach customers at the right moment and time. It has been the fuel behind Search Engine Optimization (SEO), helping brands land on the first page of search engine giants.
While the way in which people consume content and the formats that hold the highest level of popularity has shifted over the years, content remains integral to the success of any marketing strategy. This reality is reflected in 2023 marketing budgets. According to a study by NP Digital of over 8,000 marketers, 83% of companies are increasing their content production budget. This budget is being spread across numerous formats, with a particularly heavy uptick in spending on video.
2: Investment in AI Is Ramping Up
Artificial Intelligence (AI) is taking center stage in nearly every industry, and marketing is no exception. In fact, with recent advancements in AI technology, more and more marketing teams are turning to machine learning to help power strategy.
In the same NP Digital study, as cited above, 98% of marketers indicated that they plan to invest in AI tools in 2023. While nearly 100% adoption of AI might seem far-fetched, the reality is that most marketing endeavors already rely on AI to varying degrees. Ad campaigns like those run via Google and Facebook use AI for customer segmentation and predictive analytics.
The use of AI is ramping up at such a staggering rate that Gartner predicts that by 2025 organizations that implement AI in their marketing functions will be able to shift 75% of their employee’s operations from production to strategy.
AI has the power to turn mundane, time-consuming tasks into automated workflows. This means more time for marketing teams on important strategy and big-picture thinking.
(Note for Client: This is an ideal spot to link out to the blog we are currently authoring on AI in Marketing once it goes live.)
3: Organic Search Is Receiving More of the Budget
Using a search engine to locate a product or a business has become second nature to almost every consumer. Today, people are connected to the web via their mobile devices 24/7, and when a thought or question strikes, Google and Bing are there to answer.
In this environment, ranking on the first page of a search for critical keywords is necessary for any business to thrive. For this reason, in NP Digital’s study, companies indicate that they will increase their SEO budgets by 68%.
It’s an investment focused on the long-term, which is a good sign of the health of a business. While SEO efforts rarely make an impact overnight, they become the backbone of an intelligent marketing budget. Companies that can hold onto key rankings will spend less and less on each lead earned over time.
4: Brands Are Investing in Loyalty
With customers becoming extremely cost-focused, businesses quickly respond with a renewed focus on brand loyalty. In 2023, 84% of businesses indicate that they plan to increase their spending on community building.
And, it’s a trend that is predicted to stay. Gartner forecasts that one in three businesses without a loyalty program will establish one by 2027.
A huge focus of these efforts is on first-party data collection. Loyalty programs allow companies to reward their customers while simultaneously gathering critical data that they can then use for personalization and improved customer experience.
5: Ad Spending Is Rising
While companies plan to increase their organic budgets, they also indicate spending more in 2023 on digital ad campaigns. Notably, businesses want to increase Google and Bing ad spending by 59% and 47%, respectively.
In many cases, this clearly indicates the increasingly competitive landscape of digital ads. With more and more companies entering the digital sphere, reaching their target audience with a small budget becomes difficult. However, intelligent business leaders will need to be careful not to simply race to spend more on digital ads but instead to focus on improved optimization of budgets.
6: Traditional Advertising Methods See a Further Decrease
While spending is up regarding digital channels, most businesses indicate that in 2023, they plan to decrease the amount of their budget allocated toward traditional advertising methods. Print is taking the biggest hit, with businesses showing nearly a 90% drop in budget allocation. Television, radio, and billboards all face a 70-76% decrease in budget share.
This logically reflects the consumer shift away from traditional advertising consumption. However, this also indicates an opportunity for small businesses to tap into a less crowded marketing space. If enacted intelligently, savvy marketers can use small budget portions to tap into traditional advertising where audience segments still exist.
7: Social Media Spending Shifts
Social media continues to play an integral role in marketing budgets for 2023. However, the channels in which companies are investing are shifting. Thirty-four percent of businesses indicate that they plan to decrease ad spending on Twitter, while an incredible 84% plan to allocate more budget for TikTok ad spending.
Additionally, businesses focused on reaching customers in the B2B vertical plan to increase their spending on LinkedIn budgets by nearly 60%.
Prepare Your 2023 Marketing Budget
As we transition out of the year’s first quarter, it’s time to pause and reflect on your marketing budget strategy. Key trends that help indicate where your competition might be placing their focus are emerging.
Interestingly, while marketing leaders are boldly increasing numerous marketing budgets, 61% of CMOs lack the in-house capabilities to deliver on their strategies.
This is a common challenge among many business and marketing leaders. At J&L Marketing, we are here to help you enact your 2023 strategies and make the most of your marketing budget. We believe that outpacing your competition doesn’t need to mean outspending your competition and that the best marketing campaigns are optimized continually.
If you’re ready to rethink your 2023 budget, reach out to our team for a free consultation. We’ll work with you to lead the way in your specific vertical, tapping into important trends and outthinking your competitors in critical areas.