What you need to know:

• The latest Gartner CMO Spend survey has found after years of consistent decline, marketing budgets have flatlined in a leaner new normal for spending.
• Gartner analyst for marketing, Ewan McIntyre, blames lowering trust in marketing returns, inflated expectations and a plateau on productivity for the current budget situation facing CMOs right now.
• Gartner found CMOs are ringfencing paid media budgets, but trimming everything else, from talent and labour to agency and martech costs.
• Howatson+Company’s Chris Howatson calls it “being more efficient to grow” as marketers seek better productivity, cutting back time spent on unproductive work and making the tough choices to keep some semblance of growth alive.  
• Mindshare chief product officer, Gavin Gibson, says macro forces such as supply chain issues and inflation are playing a huge part locally in decision making – often outside the marketer’s control – resulting in more scenario planning requests from clients.
• The Gartner CMO Spend survey also found a short-termism divide between the budget haves and have nots – those with lower-than-average marketing budget-to-revenue percentages not investing enough in the data, analytics and tools that would give them a longer-term, strategic advantage.
• There’s also a skew towards the bottom funnel and digital performance advertising across the budget stricken, while those with more budgets display both more omnichannel focus, as well as more business-grade insights and innovation appetites fuelling their marketing choices.

Australian industry execs are agreeing with Gartner’s latest CMO Spend survey tentpole finding: After years of consistent decline, CMOs are facing a leaner new normal as marketing budgets level off at lower percentages of company revenue. Marketers are protecting paid media spend as best they can, but they’re shaving dollars off everything from talent to tech and agency relationships as they make hard choices on where to invest versus making ends meet.

The latest Gartner CMO Spend Survey, based on US, UK and European data, found average marketing budgets have flatlined, sitting at 7.7 per cent of company revenue for a second consecutive year. It’s a figure well off the highs recorded pre-pandemic: In 2018, Gartner reported average marketing spend as a percentage of company revenue was 11.2 per cent.

It’s a continuation of “the era of less” Gartner first touted in last year’s survey. “For CMOs, this may be as good as it gets for 2025, as lingering volatility significantly increases the likelihood of in-year budget cuts,” warn the report authors.

Gartner VP analyst in the marketing practice, Ewan McIntyre, isn’t surprised by the scenario confronting marketers.

“Marketing’s era of less was preceded by an era of more, when marketing average budgets exceeded 10 per cent of company revenue for a sustained period of time. This era of more benefitted from significant tailwinds, as marketing’s funding was boosted by the digitisation of customer journeys – this effectively reinvented marketing, with the allure of greater customer intimacy and the promise of massively boosted efficiency and measurability,” he tells Mi3.

“The trouble is trust in brands is declining, buying journeys have become significantly more complex and many of marketing’s investments have failed to deliver the level of return the enterprise expects. We’ve effectively been through the peak of inflated expectations [as per Gartner’s Hype Cycle model] to the trough of disillusionment. Now’s the time for CMOs to navigate their teams into the plateau of productivity, where marketing starts to demonstrably deliver against enterprise goals. Only by doing this can CMOs make a solid case for sustained budget growth.”

Howatson+Company founder and chief, Chris Howatson, is more prosaic, pointing to sluggish Australian GDP growth along with competitive market dynamics as foundational reasons for today’s status quo.

“Essentially, if you look at the real GDP growth of 2024, it only went up by 0.8 per cent, when you take out public sector spend and just look at the corporate sector. So if the true state of the economy is less than 1 per cent annual growth, what that is saying is everything is standing still,” he says. “Then look at the market dynamics and competition across categories.”

One example for Howatson is automotive. “There is a flood of new cars coming through from China that didn’t exist in our market at the scale it existed in previously. Even look at grocery and expansion of Aldi … in most big categories in Australia and those big advertisers that have sustained the communities, they’re all being attacked by vertical competition. What’s happening is that vertical competition is chopping up their most valuable customers,” he claims.

Another case in point is Macquarie Bank against the big four banks, which has grown from very little market share in consumer mortgages to 5.9 per cent in Q1, 2025 – an industry-beating 19 per cent jump year-on-year. “The real growth of the economy is almost not there, and competition is as fierce as ever,” says Howatson.

“Then what is also showing up with some clients – not all clients, but some – is that they had incredible years through Covid, and the structure of those organisations is for the volume of sales and profitability of those years versus what they are now. So the Gartner report is certainly lining up with what we’re seeing.”

Howatson posits that old quote: ‘You can’t cut your way to growth’. “You obviously can’t. But I do think what we are seeing is you can become more efficient to grow,” he says. “That’s what clients are doing. There is not the opex in organisations to just add another $5-$10 million into marketing. You’ve got what you’ve got.”

Mindshare chief product officer, Gavin Gibson, also agrees broadly with the Gartner findings, saying Australian CMOs generally have less to work with and there is more expectation placed on the budgets they have.

“We’re not as drastic as the US, UK and EU right now: With the tariffs and everything going on there, there’s another stage of concern and worry,” he comments. “But not to the extent the Gartner report is hinting at.”

Where Mindshare has seen things change is in scenario planning, something Gibson attributes largely to supply chain and inflationary issues.

“There are a lot more ‘what ifs’, where in the past you were building towards something – you had your brand cues, the icons you need to stick with. Yes, there’s the mid and lower funnel to get that traffic in. Now at least on the media side, we’re trying to prepare more scenario planning on the what ifs – if this audience shifts, or this competitor comes in here, or that price moves,” he says.

Paid media: Ringfencing to maintain share of voice

Amid cuts, marketers are ringfencing paid media as best they can. Gartner found paid media allocations ticked up to 30.6 per cent of the marketing total budget, up from 29.2 per cent in 2018. Digital channels account for two-thirds of this, with 69 per cent of all digital spend pushed into paid channels.

Gartner partly attributes the extra paid spend to the fact marketers are “getting less for every media dollar spent” as the cost of advertising increases. As Mi3 has reported, Sparro by Brainlabs data shows search, Pmax, and Meta performance costs leapt by almost every quarter throughout 2024, in some cases by high double digits.

But on the flip side, some categories have seen heightened demand require additional performance media investment: Suncorp’s EGM of brand and customer experience, Mim Haysom, has also told Mi3 consumer search queries around insurance spiked 50 per cent earlier this year as the cost-of-living triggered mass searching for better deals on the necessities, such as insurance – which meant spending more to tap that demand, while also telling the business “we don’t touch brand” budgets.

Gartner’s report found more than half of media budgets going to consideration and conversion activities, although allocations to the very bottom of the funnel are also up year-on-year. In addition, 55 per cent of respondents intend to push even more performance channels in the next 12 months. This was even as Gartner figures show a slight increase in spend on brand awareness to 29 per cent in 2025.

“It is absolutely true, wherever they can, they’re protecting their paid media dollars,” Gibson says. “There is a lot more ask of every single dollar spent. But the experiential, bigger ticket things that were always harder to justify, especially given those longer-term brand metrics you need for those, are harder to get a CFO’s approval for. If we try to put those on a media plan right now, we know we’re going to get push back. Our battle is to try and keep it not just from purely the bottom of the performance funnel, and make sure we’re keeping it mid to long-term brand and get that balance.”

Howatson feels lucky as clients aren’t reducing spend on media… but there’s a but: “Even though you’re boosting media spend, you’re probably not achieving excess share of voice – you’re probably just maintaining share of voice because the category has grown. A lot of the time, it’s brands having to put more money into media to literally keep up,” he says.

Orchard head of customer growth and martech, Anne Ngo, sees paid digital media and more spending on conversion activities at the lower end of the funnel reflecting the pressure on CMOs and brands to provide clear, measurable returns on investments.

“Paid media lets brands target specific audiences more accurately and track results directly, delivering faster feedback,” she comments. “This quick and measurable approach is especially important for brands in industries where success is measured by a change in consumer behaviour rather than just sales. Brands should be focusing more on metrics that track consumer intent and actions to ensure paid digital spend leads to real changes in behaviour and revenue, not just visibility.”

Ngo also points to third-party cookie deprecation – something many could be forgiven to have parked given the protracted deadlines, missteps on alternatives, and reversal of Google’s decision to phase them out – prodding brands to tap conversion activities and build pools of first-party data.

“This is becoming more crucial to brands, as first-party data provides a privacy-safe alternative to understanding customers across their journey and enables brands to deliver more personalised experiences,” she comments.

The end of promotional plays?

According to Mindshare’s Gibson, even heavily performance-skewed clients are looking at mid and upper funnel metrics, because know that enhances their performance whereas constant discounting and promotion is killing profitability, something ecommerce firms are increasingly realising.

“You get into the stage where you don’t have that price lever anymore… If I step away from the media side and look at supply chains, there’s only so far marketers can even go there. If they’re not still trying to drive up the yield aspect – and that’s where the brand’s coming into play. They’re almost promotion tapped out because they can’t keep dropping price promotions all the time. It’s killing their business. Therefore, there is a well-understood need in most categories to be driving those brand aspects to try and reduce the dependency and pressure on price promotion.”

Then there’s that ongoing supply chain issue Gibson argues is currently having the most impact on marketing. “It’s scenario planning like: If this stock doesn’t come in or we’re losing money on every one of those products we sell, how do we pare that back. That’s the short-termism you do feel; having more risk management in play in case something does need to change and what’s the flexibility around that. A lot of that is beyond marketing’s control,” he continues.

“Even before the unknown of the tariff wars, things like the price of cocoa going through the roof, or coffee beans, or things produced and how they are shipped has had a huge knock-on effect … the price they come in at, the profitability. Those things change the types of marketing solutions we can go with.”

When that happens, FMCG marketers turn more to the brand aspects, rather than price point promotions that lack profitability, Gibson adds.

Channel impacts: money movement

Gartner’s CMO figures in aggregate don’t paint a full picture of what’s going on. Another notable finding is how variable budgets are across categories. Half of all CMOs surveyed reported budgets of 6 per cent or lower of total company revenue, for example. The clear difference between the haves and have nots is a CMO’s ability to focus on the long or short-term.

In organisations where marketing budget accounts for under 4 per of company revenue, Gartner found CMOs allocate only 29.2 per cent of available funds to change and transformation, sacrificing both to day-to-day operational spend. By contrast, those spending at least 10.5 per cent of company revenue of marketing allocate 37.2 per cent of spend to change and transformation activities. In addition, budget-conscious CMOs are short-changing themselves on insights, data and analytics in favour of activation, which is playing out in the level of personalisation they’re pursuing.

“This is a false economy, as underinvesting in these critical capabilities lessens the potential of the available activation budget,” says Gartner’s McIntyre. “That’s not to say CMOs need to spend big in order to right-size their investments. AI is reducing the barriers of entry to analytics and insights, democratising core measurement targeting capabilities. This makes for more effective campaigns while also supporting the case that marketing is a profit centre within the enterprise.”

The budget stricken are also more likely to turn to performance channels to get shorter-term wins, with these CMOs spending the highest proportion of their budget on digital channels (64.2 per cent) compared to the rest of the pack. By contrast, big spenders are spreading budgets across a wider array of offline and online channels. Take this example: Those over-indexing on spend allocate the most (20.2 per cent of their offline budget) on linear TV advertising.

Five categories had a noticeable dip in year-on-year marketing spend in Gartner’s figures: IT and business services (-3.2 per cent), travel and hospitality (-1.7 per cent), insurance (-1.4 per cent) healthcare (-1.3 per cent), and media (-1.3 per cent).

For the second year, Gartner also tracked channel spend and performance ranking across the funnel in its CMO Spend survey. It found search advertising was ranked as both a high-impact and high-spend channel, attracting the most CMO investment and retaining a reputation as one of the most impactful channels. Despite GenAI’s emergence and expectations that it will bump off traditional digital search, marketers this year at least see pay-per-click as a bankable channel in 2025, the analyst firm said.

Video and streaming were down in the rankings however, slipping into eighth position behind retail media networks. Gartner put this down to an “overabundance of choice” – and certainly in Australia, the arrival of advertising tiers across streamers such as Disney, Max, Stan, Amazon Prime and Netflix have added to this dilemma. Similarly, podcasts and audio were down the link given the volume of content.

Linear TV retains mid to high-level spend but was rated as a low-impact channel in Gartner’s findings, ranking seventh out of 19 channels tracked when it comes to spend – but the third least impactful channel.

“If you are already skinny on your net marketing-to-sales ratio, then to hit your target, particularly if you’re a publicly listed company, you’re having to divert that to short-term results. That means continuous, steady growth in performance,” comments Howatson. “In a short-term environment, that’s what they have to do – trade their way out of low growth and fight for that switching customer.

“If you don’t have that pressure of reporting cycles or if you’re able to extricate yourself from that pressure, then I’m definitely seeing lot more innovation around what clients are going to do to drive their growth. Before you even get to spend, it’s better understanding segmentation, better understanding where that growth is going to come from, and better understanding what the product, price and promotional mix is that’s going to drive that outcome.”

No time for unproductive agency or marketing teamwork

While CMOs sustain media spend, trimming is evident on talent, technology and agencies as cash-strapped CMOs chase short-term fixes and productivity gains. According to Gartner’s figures, spend on labour is down from 23.2 per cent in 2018 to 21.9 this year. Agency spend is down 2.1 per cent to 20.7 per cent, and martech has dipped from 24.5 per cent to 22.4 per cent.

Marketers have more cutting in their sights, with 39 per cent of respondents looking to reduce labor costs by simplifying overlapping roles, eliminating headcount and centralising critical responsibilities. Eliminating underperforming agency relationships, simplifying agency rosters, and renegotiating agency contracts and scopes of work are seen as the top ways of doing it.

“The conversations we’re having with senior marketers indicate they’re looking to reduce both the size of their in-house teams and their reliance on external agencies,” says McIntyre.

This is where technology and AI bubbles up to the surface. The top three actions identified by CMOs as contributing to productivity improvement are leveraging data, analytics and measurement to optimise performance, using technology such as AI to automate key tasks, and integrating advanced technologies including AI to enhance efficiency.

But aspirations often differ from reality, says McIntyre: “Only a small percentage of respondents indicate AI is helping them reduce headcount at the moment – many more report they’re using the technology to push through some of the productivity bottlenecks that have long existed in marketing.”

Highlighting the lack of foresight and investment into teams, the three lowest priorities for Gartner CMO respondents were maximising team productivity through investments into training and development (12^th), setting clear and shared performance goals and objectives (11^th) and adopting new ways of working (10^th).  

Howatson sees agency spend trimming as part of a longer-term trend as marketers seek productivity improvements and cost out.

“There’s no room for unproductive work,” he says.

“Everything is focused, has a timeline, an output, and everything lines up to a transformation program inside the client’s organisation. They have been gone for a bit, but the lazy retainers where you had a body of people waiting for the work to come has deteriorated and disappeared. Clients are saying the stuff in the bottom of the funnel just needs to be as efficient as possible, to take cost out of that, then to use you to help with creativity and innovation.”

He sees a clear lesson for agencies: Find the more impactful work and focus on it.

“We have to figure out how to be at our best, which used to be 20 per cent of the work we do, and increasingly have that be 30, 40, 50, 100 per cent of the work we do,” he says. “That’s what we’ll continue to see – the low-level work continuing to be optimised by AI, and agencies all about that peak value. The outcome, better or worse, means agency will probably get smaller and more senior. Clients really want experience and advice – they don’t just want what they can get from next door.”

Market volatility and inflationary backlash

Even as it presented these findings, Gartner added the caveat of macro, economic and geopolitical volatility on how spend pans out: The budget CMOs started 2025 with may not be the budget they end up with by the end of the year.

Take consumer products, which is at the mercy of fluctuating inflation. According to those surveyed by Gartner, 72 per cent saw marketing budgets and strategy negatively affected by inflation. In manufacturing, Trump’s tariffs and US federal policies has 92 per cent of respondents to another Gartner supply chain survey expecting costs to increase.

In the recent The CMO Survey, 60 per cent of respondents said inflationary pressures were either increasing or decreasing marketing spending levels in their companies, with the majority (43.5 per cent) experiencing a decline in spend – albeit a slightly smaller percentage than in 2024, but still a noted group.

Locally, Australia’s own battles to curb inflation are another reflection of this volatility, and the second rate cut of the year, executed by the Reserve Bank of Australia in May, is an example of how things are still shifting, making for a shorter market. Which means CMOs must continue to calibrate their scenario plans and strategic responses to external factors and the issues and opportunities they bring.

In this vein, McIntyre reports more advance planning techniques are coming into marketing budgeting itself. For instance, 29 per cent of CMOs say estimating cost of achieving objectives is a major factor influencing their budget planning (up from 24 per cent in 2024). In addition, the influence of zero-based budgeting on at least some of the marketing budget has grown 10 per cent year-on-year.

Gartner’s CMO Spend report was based on a survey of more than 400 respondents across the US, UK and Europe.