Marketers Face Obstacles With Increased Tech Investment

Marketing executives from for-profit companies in the United States indicate an increase in marketing technology usage, but many also express confusion about how to utilize these technologies for performance advantages fully.

According to the 32nd edition of The CMO Survey, only 10% of companies are already using large language models in marketing activities, even though generative AI has already had a positive impact on companies in terms of lower overhead costs (7%), improved customer satisfaction (6.1%), and sales productivity (5.1%).

However, the report reveals significant barriers to the full integration of technology and generative AI in marketing.

Duke University, Deloitte, and the American Marketing Association collaborated to create the CMO Survey, which is supervised by Professor Christine Moorman of Duke University’s Fuqua School of Business. This edition included replies from 292 marketing leaders, 94% of whom occupy VP or above positions.

Marketing Technology and Generative AI

According to the poll, companies currently spend 19.9% of their marketing expenditures on marketing technology (Martech), but this figure is anticipated to rise to 30.9% in five years.

This estimate is made although just 56.4% of purchased Martech tools are used. Furthermore, almost half of marketing leaders see a major disconnect between marketing technology payoffs and their expectations for these payoffs.

The poll also indicated that the poorest performance is in ‘hiring personnel to manage Martech’ and ‘integrating Martech across various data systems in the firm.’ “If Martech is going to pay off, these people and data integration problems must be resolved,” said the survey’s director, Professor Christine Moorman of Duke University’s Fuqua School of Business.

Companies use generative AI in just 7% of marketing efforts. Consistent with this, just 10% of companies use Large Language Models (LLM), 39.0% have never used such tools, and 51% are assessing or piloting these models.

“This data shows there is a massive opportunity for further adoption of AI by companies and a transformational opportunity for marketing,” says Moorman.

However, companies who are incorporating generative AI into their operations noted substantial challenges such as “minimizing bias” and “investing in the necessary hardware,” according to the study findings. On top of that, “even ratings for core strategy challenges, such as ensuring that generative AI is a good fit for the brand and a good fit for the target markets, are only average, indicating the tools need to be optimized better for performance,” Moorman reported.

Sustainability in Marketing

Sustainability and climate problems now account for 1.9% of marketing expenses, up from 1.2% the previous year. These budgets are expected to expand at a rate of 4.5% over five years. However, according to the poll, one-third of firms do not use marketing to address climate change issues.

More than half of those organizations using marketing to address sustainability challenges are doing so by “changing products and/or services,” while 42.9% are “changing partners” and 40.3% are modifying marketing activities. Only 25.6% of organizations are using climate measures, up from 18.7% two years ago.

“This spending and use levels have improved,” stated Moorman. “However, in terms of specific actions around changing products, services, partners, and promotions, we are still not witnessing levels as high as those reported in February 2020, before the pandemic.”

Marketing Spending, Leadership, and Job Opportunities

Following a peak in 2022, marketing spending as a proportion of the corporate budget fell further this year (13.8% against 10.2%).

“Even with a continued sense of confidence about the US economy, inflationary pressures are causing a reduction in marketing spending. The drop is comparable with the second half of 2023, with 45% of marketing leaders experiencing expenditure difficulties, but it is lower than a year earlier, when it was 52%,” Moorman added.

Customer Relationship Management spending (from 6.2% to 3.9%) and brand creation (5.5% to 3.9%) were particularly adversely impacted.

The poll also indicated that marketing organization growth fell to 3.9% from 5.5% in Autumn 2023, while marketers expect it to rise to 4.4% next year.

While brand, digital marketing, and advertising remain the primary activities of marketing executives, they have reported a drop in their amount of responsibility for these and other functions compared to a year earlier.

However, marketers said that firms appreciate their job (5.1, on a scale of 1 to 7), indicating that the importance of marketing has increased in the post-pandemic years, particularly for small businesses and B2C product enterprises. The findings show that this impact has a beneficial effect on stock market prices.

“The fact that marketing is viewed as a value-creating function in companies is clear,” said Moorman. “However, the cross-functional work of marketers is changing, as digital transformations influence who, what, and how strategy decisions are being made.”

Marketing Performance and Prediction

“Marketing performance remains strong,” Moorman stated. Profits increased from the previous year (8.3% versus 5.6%), as did customer retention and brand value (9.9% and 6.3%, respectively).

Smaller enterprises performed the best across all criteria.

However, macroeconomic forecasts are varied, according to the study. While confidence in the US economy remains strong (67 out of 100), marketers say inflationary pressures are reducing marketing investment. Companies in the B2B and B2C service sectors, in particular, are seeing the most significant spending reduction as a result of inflation.

“Inflationary pressures remain real, but marketers appear to be identifying efficient ways of using spending to reach and convert customers, even as the spending belt remains tight,” according to Moorman.

Which Companies Establish Marketing Standards?

The CMO Survey’s spring editions invite marketing leaders to select firms that they believe set the benchmark for marketing excellence. For the sixteenth consecutive year, Apple was the overall winner, with Amazon, Nike, the Proctor & Gamble Company, State Farm Insurance, and Microsoft among the industry winners.

Source- Forbes