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CEO Survey: As economic outlook brightens, global uncertainty casts a shadow

With economies around the world facing continued uncertainty and the markets in retreat, startups are being told to spend wisely and conserve cash. But for high-growth companies, austerity doesn’t mean slamming on the brakes, especially when it comes to marketing. Indeed, downturns are often when companies have the greatest need to market themselves effectively.  In our exclusive survey of 74 portfolio company CMOs fielded in August, most respondents said their 2022 budgets are larger than they were the previous year. And while some companies have trimmed those budgets since the beginning of the year in response to a worsening outlook, 1 in 5 say their planned marketing investments for the year have actually grown since then. (You can explore the full survey results, and filter by region, sector, and stage, with Sōzō Pulse, our <a target="_blank" href="https://visionfund.com/insights/data/cmo-data-viz">interactive data experience</a>.)As one respondent put it succinctly, the most valuable contribution marketing can make in the current climate is to “help solidify our message and position in the market as companies become more risk averse.”  Our survey also offers insights into where companies are placing their <a target="_blank" href="https://visionfund.com/insights/efficient-marketing-that-moves-the-needle">marketing bets</a>, which areas of marketing are proving most effective, how well their organizations work, what skills they need the most, and what they make of the techlash.  <h2>1. Doubling down on marketing</h2>The S&amp;P 500 has fallen sharply since New Year’s Day, higher interest rates have sparked fears of a recession, and the capital going to startups has slowed from a flood to a trickle. Yet more than half of surveyed CMOs said their annual marketing budget grew from 2021 to 2022, and 1 in 3 companies said the year-over-year increase topped 25%. The behavior of these high-growth startups mirrors that of large companies, which increased marketing spend to 9.5% of company revenue in 2022, up from 6.4% in 2021, according to the Gartner 2022 CMO Spend and Strategy Survey.Meanwhile, the downturn, which has deepened since the beginning of the year, appears to have had a mixed impact on those budgets. While just over half of companies decided to rein in their marketing spend for the year since January, more than 1 in 5 (22%) are maintaining spending levels, and 1 in 5 (20%) have decided to spend more than they had originally planned.

Taking a sector view, health tech companies appear to be stepping up their marketing spending most aggressively, with half of companies saying their budgets will grow by 25% or more this year. Additionally, earlier stage companies are upping their marketing spend far more aggressively than older, more mature companies. Forty-three percent of series A or earlier companies and 41% of series B &amp; C companies plan to grow marketing by 25% or more, while only 10% of series D &amp; E and 7% of late-stage private and public companies said so.  These growing budgets are translating into more headcount. Forty-two percent of all respondents said they expect the size of their teams to increase this year. Startups at the beginning of their life cycle appear to be charging ahead at a greater rate than anyone else, with 80% of CMOs of series A or earlier companies forecasting annual growth in their departments.<h2>2. Performance and demand generation rule, followed by brand and product  </h2>One reason marketing budgets are growing is that many companies see marketing as an investment. And the clearest way to earn, and measure, ROI in marketing is through performance/demand generation. What’s more, a wave of innovation has energized the lead generation sector, with new entrants offering better analytics, personalization, and new ways to connect publishing channels with revenue, among other things.   It’s not surprising then, that the majority of companies (54%) said performance/demand generation was their top area of spend. In Latin America, performance/demand generation plays an even bigger role: nearly 9 in 10 companies said it was their top area of spend. Globally, brand marketing was a distant second, which just 19% of companies said was their top area of marketing investment. The top areas of spending matched the top areas of satisfaction. Nearly 1 in 3 CMOs said they were most satisfied with their investments in performance/demand generation, while 24% said they were most satisfied with brand marketing, and 19% with product marketing. While content marketing plays a much smaller role, with just 5% of companies saying it was their top area of spend, 8% of companies said it was the marketing category they were most satisfied with. Similarly, product marketing was the top area of spend for 9% of companies and the top area of satisfaction for 19% of companies.

The survey also pointed to some changes in how companies allocate marketing budgets over time. As companies mature, they tend to decrease their reliance on performance/demand generation and shift more of their budgets toward brand, and to a lesser extent, product marketing. And the companies with the smallest marketing budgets as a percentage of revenue were either very early stage or very late stage/IPO. While 50% of companies spend less than 5% on marketing overall, the number was 57% for series A companies, and 60% for late-stage private/public companies.

<h2>3. Organized for success despite some skills gaps</h2>Looking inward at the cultural and organizational criteria required for success, marketers are a pretty happy bunch, with 96% of CMOs saying they felt they had the support necessary from their CEO. Relationships across the executive suite were generally strong too. CMOs highlighted the head of sales, CBO, and head of product as their most important relationships, in that order, on the executive team. When it came to the strength of those relationships, CBOs and head of product tied for the strongest relationship over head of sales.

As they look to grow their teams, CMOs are consistently focused on two skills that are in highest demand: product marketing and experience with data and analytics. Not surprisingly, recruiting overall continues to be a major worry. Some CMOs pointed to the challenges of adapting to changing working conditions from the pandemic. One noted that the “remote-first expectation for most staff creates the need for interactions within the company outside of digital ones.” Another key difficulty is identifying viable candidates. A respondent said they hoped to implement “better recruiting support to hire open reqs for functions we are completely missing, like product marketing and marketing operations.” The uncertain <a target="_blank" href="https://visionfund.com/insights/how-cfos-are-navigating-a-changing-job-market">economic environment</a> also loomed large, with one respondent saying the biggest challenge was “keeping people motivated and driving retention during the downturn and low stock price.”<h2>4. Techlash: Real or imagined?</h2>There was a time when the tech industry walked on water. Polls consistently showed that the tech companies with some of the highest favorable ratings of any company were widely admired and seen as some of the most desirable places to work. But that trust has been eroded by a series of forces, from tech’s growing power to more awareness about the negative effects of social media, privacy violations, and the failures of many tech platforms to moderate content. According to the Edelman Trust Barometer trust in the technology sector has fallen from 78% in 2012 to 72% in 2022, though the industry remains more trustworthy than any other. The CMO survey confirms these findings. Just 43% of respondents said the media has a positive view of the tech sector. Companies in the health tech sector were somewhat more upbeat, with 63% saying the media had a positive view of tech. And interestingly, the older and bigger the company, the more likely it was to see media perceptions of tech as negative. For example, 43% of series A or earlier companies and 56% of series B &amp; C companies said the media viewed tech in a positive light, compared to just 20% of companies that were public or late-stage private. When it came to the media’s perception of their own companies, a much larger percentage of CMOs saw it as positive, though again, as companies grew in size and age, the numbers dropped.

While good relationships with the press, hopefully translating to favorable media coverage, is clearly important to CMOs, many noted that developing those relationships or even getting attention in the press has grown increasingly difficult. As one CMO said, “Having a positive media sentiment becomes a key enabler, increasing trust to acquire new users and generate transactions.” Three other responses pointed to the challenges: “With some of the more traditional industry reporters, there’s a heavy dose of skepticism—‘hype vs. reality’ is a persistent theme.” “It’s still very difficult to get reporters interested in writing about our company since the space isn’t viewed as particularly interesting.” “B2B is not sexy to the media.”

CMOs weigh top priorities, larger budgets

CMOs - Q3 2022

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Our Analysis

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English US

Doubling down on marketing in an uncertain environment

Performance marketing leads the way as high-growth startups face hiring challenges and grapple with the techlash.

Change in marketing budget in 2022 compared to 2021

Change in marketing budget since the beginning of the year

Highest priority based on marketing budget allocation

Area of investment CMOs are most satisfied with

Size of marketing budget as a percentage of revenue

Percentage of budget that goes to outside agencies

Marketing lead’s most important working relationship in the executive suite

Marketing lead’s strongest working relationship in the executive suite

Media sentiment

CMOs weigh top priorities, larger budgets

Thirteen countries, one culture