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Gartner

Third of marketing budgets spent on operational excellence, but results inconsistent
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Thirty-one per cent of marketing budgets are spent on the pursuit of operational excellence, despite having inconsistent impact on overall organisational performance.

Gartner surveyed over 400 marketing operations (MarOps) leaders between August and October 2022 to find that 94% of marketing organisations are formally pursuing operational excellence (e.g., improving processes, building new capabilities). This indicates an acceleration of investment since 2020, when only 49% of marketing organizations surveyed had a dedicated MarOps leader.

However, the survey found that 72% of operational excellence pursuits don’t actually demonstrate characteristics that align with success, putting enterprise growth and marketing transformation at risk.

“CMOs are under pressure to make every dollar count,” said Michael McCune, Senior Director, Advisory in the Gartner Marketing practice. “However, their teams are spending a large proportion of their budgets pursuing change and improvements in ways that aren’t effective.

“‘Business-as-usual’ marketing activities do have to change, but CMOs shouldn’t divert funds away from activities such as advertising and trade shows that could have a more significant impact on marketing’s overall remit to drive growth.”

Strong pursuits of operational excellence complement the day-to-day management of marketing’s work and are associated with characteristics such as automated workflows, effective use of Agile methods and persistent effort over multiple years.

Organizations with strong pursuits were 43% more likely to report exceeding their operational performance goals compared to organizations without strong pursuits, but at a greater cost: They spend 45% more than average and dedicate 18% of their staff to achieve MarOps excellence, compared to the average 5% of staff dedicated to all other pursuits.

“Marketing organisations can’t blindly or ineffectively invest in improvement at the expense of business as usual unless it shows results, given the tight economic and labor markets,” said McCune. “They need to lay a better foundation for that investment and can look to strong pursuits for guidance.”

In order to maximize the impact of future MarOps investments, Gartner says marketing leaders should:

  • Communicate to stakeholders that pursuits of operational excellence will not have a persistently high cost. A new pursuit likely has many opportunities to drive improvements, but it should not be a cost dragged on marketing over the long term. As improvement occurs, resource requirements for continuous improvement should diminish.
  • Seek resolution of known critical gaps. CMOs often know about systemic problems, but lack resources to address them at the start of operational excellence efforts. Make sure to have a dedicated team working to resolve one or some of the known critical gaps so that investment in the pursuit has early payoffs.
  • Ensure that MarOps efforts don’t duplicate enterprise initiatives. Alignment with operational excellence pursuits in sales and service functions is always a good idea, but CMOs should avoid neglecting the enterprise-wide efforts of other functions such as finance and HR that may lighten marketing’s lift over time.

Marketers use just 42% of their ‘martech stack’ capabilities
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Marketers report utilising just 42% of the breadth of capabilities available in their martech stack overall, down from 58% in 2020.

Gartner surveyed 324 marketers in May and June 2022 to determine the state of marketing technology acquisition, adoption and use.

“CMOs reported allocating a quarter of their entire marketing expense budgets to marketing technologies in 2022,” said Benjamin Bloom, VP Analyst in the Gartner Marketing practice.

“Despite turbulent budgets in previous years and current economic headwinds, tech investments are a priority for CMOs and proving their ROI is more crucial than ever,” Bloom said. “Yet the challenges associated with martech underutilization, such as new business models and disrupted customer journeys, are making it difficult for marketers to demonstrate technology’s value.”

The 16 percentage point drop in overall martech utilization in the past two years can be attributed to a significant amount of overlap among marketing technology solutions (30% of respondents), difficulty identifying and recruiting talent to drive adoption/utilization (28%), and complexity/sprawl of the marketing technology ecosystem (27%).

Martech Stacks Prepare for a Cookieless Future With New Adtech and Commerce Capabilities

One of the tools identified by survey respondents that support innovative marketing channels was social commerce, with 62% of respondents saying they have deployed, or plan to deploy, such technology (see Figure 1). Technology to support advertising execution and measurement in audio and streaming/connected TV (CTV) environments has also found a base of support, with 65% of respondents exploring or piloting associated technologies.

Figure 1. How Marketing Leaders Are Leveraging Technology to Support Emerging Activities (% of Respondents)

Source: Gartner (September 2022)

Marketers also indicated interest in commercial activity within more emerging technologies. This includes the metaverse and non-fungible tokens (NFTs), with 62% exploring or piloting technology to support metaverse advertising and 59% exploring or piloting technology to enable creation of NFTs.

“The fact that marketers are already leveraging technology to support emerging activities underscores their desire to outfox the competition and get a head start on controlling their own destinies in a world of more fallible identifiers,” said Bloom.

To maximize the value of martech investments, Gartner recommends marketing leaders:

  • Infuse marketing technology adoption and utilization goals into team performance objectives to minimize wasted investments.
  • Manage the risk of expensive integrated suite investments. Establish alternatives to preserve negotiation leverage and persistently validate the vendor’s ability to support desired martech capabilities.
  • Review the approach to supporting customer journey orchestration with technology to ensure that martech and IT collaborate through capability-focused delivery teams using an iterative approach.
  • Avoid leaving investments in tools and technologies for social commerce, podcast advertising and CTV/over-the-top (OTT) streaming advertising to agencies or service providers by default. Pursue long-term in-house capability development around these tools and include them in their martech roadmap.

Marketing analytics are only influencing 53% of decisions
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Marketing analytics are responsible for influencing just over half (53%) of marketing decisions, according to a survey by Gartner.

In May and June 2022, Gartner surveyed 377 users of marketing analytics to explore the role of marketing analytics in decision making.

“CMOs often believe that achieving marketing data integration goals will lead to greater influence and increased value of marketing analytics,” said Joseph Enever, Sr. Director Analyst in the Gartner Marketing practice. “The reality is that better data won’t increase marketing analytics’ decision influence alone. CMOs must address the real challenges — cognitive biases and the need for a data-informed culture.”

The survey found that the quantity of marketing decisions that analytics influences does matter: Organizations that report marketing analytics influence fewer than 50% of decisions are more likely to agree that they are unable to prove the value of marketing. Once marketing analytics teams cross that 50% threshold, there are likely diminishing returns to striving to increase the quantity of decisions influenced.

“By 2023, Gartner expects 60% of CMOs will slash the size of their marketing analytics department in half because of failed promised improvements,” said Enever.

Top Barriers to Marketing Analytics’ Influence: Data Quality Challenges and Cognitive Biases

Consumers of marketing analytics continue to cite evergreen data management challenges as the top reason analytics are not used when making decisions. The challenges of “data are inconsistent across sources” and “data are difficult to access” rose to the top in this year’s survey.

Marketing organizations regularly respond to these challenges by integrating more data or acquiring different technology seen as a fix-all approach to marketing data management — yet they fail to realize tangible impacts on key outcomes. For example, marketers experience diminishing marginal returns on data integration when pursuing a 360-degree view of the customer.

Barriers to the use of marketing analytics in decision making are not always caused by data integration challenges unique to marketing — rather, much of this boils down to people and/or process problems.

For instance, key cognitive biases are at the root of marketing analytics’ influence plateau. One-third of respondents reported that decision makers cherry-pick data to try to tell a story that aligns with their preconceived decision or opinion.

In addition, roughly a quarter of respondents said that decision makers do not review the information provided by the marketing analytics team (26%), reject their recommendations (24%), or rely on gut instincts to ultimately make their choice (24%).

CMOs must address these challenges by:

  • Tracking the decisions that are made based on analytics to provide a current state of view and areas to improve. Identify examples of marketing analytics work that provided actionable recommendations to a marketing campaign or program. Marketing leaders should encourage their team to look for patterns in decision-making habits and to document the types of decisions they influence.
  • Combatting cherry-picking. Set KPIs and metrics before launching a new campaign or marketing strategy, not after the data has already started to come in.
  • Encouraging senior leaders to set an example. Avoid being a HiPPO (Highest Paid Person’s Opinion) and actually allow data to inform, or change, decisions.
  • Establish analytics upskilling programs that account for differing workflows and resource constraints across the marketing organization. Build personas that detail how different employees need to use data in their roles and prioritize training sessions that best enable participants to learn the skills they need to perform their job.

Conversational AI will reduce contact centre agent staff costs by $80bn in 2026
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Conversational artificial intelligence (AI) deployments within contact centres will reduce agent staff costs by $80 billion by 2026, according to Gartner.

Furthermore, worldwide end-user spending on conversational AI solutions within contact centres is forecast to reach $1.99 billion in 2022.

“Gartner estimates that there are approximately 17 million contact center agents worldwide today,” said Daniel O’Connell, VP analyst at Gartner. “Many organizations are challenged by agent staff shortages and the need to curtail labor expenses, which can represent up to 95% of contact center costs. Conversational AI makes agents more efficient and effective, while also improving the customer experience.”

Gartner projects that one in 10 agent interactions will be automated by 2026, an increase from an estimated 1.6% of interactions today that are automated using AI. Conversational AI can automate all or part of a contact center customer interaction through both voice and digital channels, through voicebots or chatbots, and it is expected to have transformational benefits to customer service and support organizations within two years.

“While automating a full interaction – also known as call containment or deflection – corresponds to significant cost savings, there is also value in partial containment, such as automating the identification of a customer’s name, policy number and reason for calling. Capturing this information using AI could reduce up to a third of the interaction time that would typically be supported by a human agent,” said O’Connell.

While the benefits of conversational AI are compelling, the technology is still maturing. A fragmented vendor landscape and complexity of deployments will result in measured adoption through the next two years.

“Implementing conversational AI requires expensive professional resources in areas such as data analytics, knowledge graphs and natural language understanding,” said O’Connell. “Once built, the conversational AI capabilities must be continuously supported, updated and maintained, resulting in additional costs.”

Complex, large-scale conversational AI deployments can take multiple years as more call flows are built out and existing call flows are fine-tuned for improvement. Gartner estimates integration pricing at $1,000 to $1,500 per conversational AI agent, though some organizations cite costs of up to $2,000 per agent. Therefore, early adoption of conversational AI will be primarily led by organizations with 2,500 or more agents with budget for the requisite technical resources.

Gartner identifies Four Pillars driving tech innovation in customer service
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There are four pillars driving technology innovation across customer service and support (CSS) organisations, including getting connected, process orchestration, knowledge and insight and resource management.The Gartner Hype Cycle for CSS Technologies, 2022 contains the most-important maturing technologies for supporting customers. The Gartner Hype Cycle provides a view of how a technology or application will evolve over time, providing a source of insight to manage its deployment within the context of a specific business goal.The Gartner Hype Cycle allows clients to get educated about the promise of an emerging technology within the context of their industry and individual appetite for risk.

“Efforts to increase the use of digital channels and improve automation rates using analytics are driving customer service technology spending, despite economic headwinds,” said Drew Kraus, VP Analyst at Gartner. “The technologies on this year’s Hype Cycle aim to enhance customer service, create a more seamless customer journey, and better design and direct future journeys.”

Getting connected

This category of technology focuses on delivering a channel-agnostic, architected design to create customer service journeys, including intelligent self-service.

For example, cloud contact center as a service (CCaaS) is a cloud-based application service platform that enables organizations to manage multichannel customer interactions holistically with prepackaged applications to support customers and employee engagement. Creating a seamless customer journey across assisted and self-service channels is the top priority for customer service leaders in 2022 and accelerating CCaaS adoption furthers this endeavor.

“Cloud enables organizations to focus on transforming customer experience (CX), rather than managing the day-to-day technology needs of users, which is fueling the 22% CCaaS market growth to $10.9 billion in 2023,” said Kraus.

Additional technologies on the Hype Cycle within this category include augmented reality for customer support, consumer messaging applications, proactive communications applications and services, and video contact center.

Process orchestration

The technologies within the process orchestration pillar support increasingly complex and personalized customer engagements, often via automation. For example, chatbots, a form of virtual customer assistants (VCAs), are expected to become the primary customer service channel for a quarter of organizations within five years as they evolve to handle more involved customer requests.

“Automating interactions in the enterprise has tremendous business impact that cannot be understated,” said Kraus. “The emergence of sophisticated AI voice capabilities have made large-scale call center automation viable, with huge potential for savings and positive CX.”

Additional process orchestration profiles on the Hype Cycle include customer engagement center (CEC), customer technology platforms and multiexperience.

Knowledge and insight

Innovations within this category center around the delivery of customer and operational insights, and the recommendation of next best actions across all functional groups. Key technologies on the Hype Cycle here include customer service analytics, customer journey analytics, voice-of-the-customer solutions and knowledge management for customer service.

As making better use of analytics and AI remains a top three priority for CSS leaders in 2022, many of the technologies in this category can help. One example is customer data platforms (CDPs), or software applications that support marketing and CX use cases by unifying a company’s customer data from multiple channels. CDPs optimize the timing and targeting of messages, offers and customer engagement activities, and enable the analysis of individual-level customer behavior over time.

Resource management

This category consists of technologies that engage and empower employees, resulting in a stronger CX. For example, workforce engagement management (WEM) solutions expand on the already mature workforce optimization (WFO) market by accommodating complementary technologies – interaction assistance and voice of the employee (VoE) – that help drive employee engagement. They are expected to have a high impact on service organizations within two to five years.

“WEM brings a much-needed additional dimension to the management of contact center employees,”  said Kraus. “The increase in gig and freelance workers is putting pressure on customer service departments to ensure a high perception of employee experience, without which securing their commitment will be increasingly challenging.”

Other technologies on the Hype Cycle within this pillar include mobile field service management and field service workforce optimization.

Gartner clients can read more in “Hype Cycle for Customer Service and Support Technologies, 2022.”

Marketing budgets have plummeted, says Gartner
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Marketing budgets have fallen to their lowest recorded level, dropping to 6.4% of company revenue in 2021 from 11% in 2020, according to Gartner.

In the annual Gartner CMO Spend Survey, the company surveyed 400 CMO and marketing leaders in North America, the UK, France and Germany from March 2021 through May 2021, tracking the critical areas marketers are investing in and where cuts are being made from people, programs and technologies.

“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 (see Figure 1),” said 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 Gartner CMO Spend Survey, 2021 revealed that no one – regardless of company size or industry – has escaped swinging cuts in marketing budgets. In fact, no industry achieved a double-digit budget in 2021 (see Figure 2). Travel & hospitality, manufacturing and tech product companies have experienced the greatest cuts in 2021.

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

Gartner 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% of the total marketing budget.

When looking at the largest resource allocation – agencies, media, labor and paid media – agency spend continues to decline.

“Albeit a small dip from 23.7% in 2020 to 23% in 2021, this continual change indicates significant in-housing activity, as CMOs reimagine the capabilities that can be supported by their internal teams,” added McIntyre.

CMOs report that 29% 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% of the total budget.

Digital Commerce Tops Program Spend

2020 and 2021 have seen drastic changes to customer buying journeys – both B2C and B2B alike, forcing even digital late-comers to accept the inevitable shift to online channels. When looking at budget allocation by programs and operational areas, CMOs report digital commerce makes up 12.3% of the total budget. Likewise, marketing operations and brand strategy make up 11.9% and 11.3% of the total budget.

However, while marketing analytics still commands 11% of the total budget, it has continuously dropped in prioritization – now in the fourth position in 2021.

“CMOs continue to invest in marketing data and analytics, however, for many, the results have failed to live-up to expectations,” said McIntyre. “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.”

20% of brands to abandon mobile apps as Virtual Customer Assistants come to the fore
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Twenty-five percent of customer service and support operations will integrate virtual customer assistant (VCA) or chatbot technology across engagement channels by 2020, up from less than two percent in 2017, according to Gartner.

Speaking at of the Gartner Customer Experience Summit in Tokyo, Gene Alvarez, the company’s managing vice president, said more than half of organisations have already invested in VCAs, as they realise the advantages of automated self-service, together with the ability to escalate to a human agent in complex situations.

“As more customers engage on digital channels, VCAs are being implemented for handling customer requests on websites, mobile apps, consumer messaging apps and social networks,” Alvarez said. “This is underpinned by improvements in natural-language processing, machine learning and intent-matching capabilities.”

Gartner says organisations report a reduction of up to 70 per cent in call, chat and/or email inquiries after implementing a VCA. They also report increased customer satisfaction and a 33 per cent saving per voice engagement.

This follows a 2017 Gartner survey that found that 84 per cent of organisations expected to increase investments in customer experience (CX) technology in the year ahead. Other Gartner predictions include:

  • By 2019, 20 percent of brands will abandon their mobile apps.
  • By 2022, two-thirds of all customer experience projects will make use of IT, up from 50 percent in 2017.
  • By 2020, 30 percent of all B2B companies will employ artificial intelligence (AI) to augment at least one of their primary sales processes.
  • By 2020, more than 40 percent of all data analytics projects will relate to an aspect of customer experience.
  • By 2020, augmented reality, virtual reality and mixed reality immersive solutions will be evaluated and adopted in 20 percent of large enterprises as part of their digital transformation strategy.
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