The latest CMO Survey produced by Duke Fuqua School of Business reflects what many business leaders already know. Optimism about the economy is fading, and inflation is pressuring marketing budgets. But business leaders are finding the best path to marketing spend optimization, especially with the use of AI.

Slowing Growth Rates

Sales

Business leaders have sounded the alarm. Sales growth is declining and has been for the past two years. Leaders listed sales growth at 8.3%. Of the four categories reported on by the CMO Survey, the B2B product sector reports the best outcome. These businesses have experienced a 9.1% sales growth rate in the past year.

Customer Retention

When asked about their customer retention rate, business leaders shared their overall score of 7.7%. This figure is the lowest it’s been in three years. B2B product companies reported the lowest score: 5.3%.

Customer Acquisition

Marketers also rely on acquiring new customers. The overall score was 7.5%. B2C product companies have struggled on this front, possibly due to inflation, and had a 4.7% score.

Marketing Spend Optimization and Inflation

Inflation has impacted marketers too, with around 43% reporting a planned reduction in marketing spending in 2025.

But other businesses are increasing spending. In the past year, marketing expenses as a percent of revenue have increased from 7.7% to 9.4%. Here’s how they break out by business type:

• B2B Product 6.4%
• B2B Services 9.0%
• B2C Product 15.5%
• B2C Services 6.0%

In the past year, overall marketing spending grew only 3%. Going forward, that number will increase to 8.9%. For digital marketing, growth was 7.3% and in the next year will increase to 11.9%.

It’s also helpful to understand by business type how marketing spending has increased in the past year. (Digital percentages appear in parentheses.)

• B2B Product 2.5% (5.9%)
• B2B Services 4.3% (6.0%)
• B2C Product 5.2% (8.8%)
• B2C Services 1.2% (10.4%)

The largest spending increase in overall marketing spending have taken place in the tech/​software vertical. For digital spending, the biggest jump happened in the CPG vertical.

Traditional Advertising Outlook

Marketers will reduce their outlay for traditional advertising by 0.3% in the next year. The steepest decline will occur in the B2C product sector. The reductions will be especially prevalent in communications and CPG verticals.

Planned Marketing Programs

In their quest for marketing spend optimization, business leaders will adjust how they allocate their budgets. The rate of slowing growth in marketing spending varies by type. Businesses say in the next 12 months that they will reduce their rate of marketing expenditure growth in the following ways:

• CRM (-12%)
• Brand building (-6%)
• Customer experience (-38%)
• New product intros (-27%)
• New service introductions (-35%)

Social media

The CMO Survey has consistently asked business leaders about their social media spending and outcomes. In the past year, social media spending accounted for 12.1% of the marketing budget. But in the next year, the amount spent will be 11.3%.

B2C product marketers allocate the biggest portion of the budget,19.2%, to social.  According to CMO analysts, business leaders routinely predict they will spend more on social than they actually do.

Generative AI

In the past year, marketers report a 116% increase in the use of generative AI. B2C service companies are using AI to a greater extent than other business types. The verticals relying most heavily on generative AI include education, transportation and tech/​software.

Generative AI is now used in 15% of marketing activities. Business leaders claim these efforts are saving them 10.8% in overhead costs. The use of this technology may have a huge impact on leaders who are committed to marketing spend optimization.

On a scale of 1 to 7, business leaders say that gen AI has helped with specific challenges:

• Better security to protect client data 4.6
• Align AI-​generated marketing strategy with brand fit 4.3
• Align AI-​generated marketing strategy with target customer fit 4.2

The Year Ahead

The extra challenges your accounts are facing this year make it crucial for them to target the right audiences using the right media format. With a subscription to AdMall, you can review the specific media preferences of their target customers. Using this date in your presentation will help increase revenue, for them and you, and allow for marketing spend optimization.

Image by AS Photography on Pexels.