Read the Blog

Read Professor Moorman’s analysis of key survey results.

Marketers Join CFOs in Predicting an Economic Downturn

*Lauren Kirby and Holly Larson contributed to this post.

The economy is now it is 10th year of recovery with years of eye-popping gains across startup valuations, corporate growth, consumer spending, and stock market P/E spreads, to name a few. Are the best days behind us? 2018 certainly ended on a volatile note and market analysts generally portend a coming recession—they just do not know when. The latest CMO Survey digs deep into marketers’ psyches and plans to understand how they are preparing to navigate an uncertain economic environment in 2019.

Are gloomy days ahead? Let’s see what CMOs are thinking now.

CMO optimism flags as business uncertainty increases

Optimism among U.S. marketing leaders has fallen to the lowest level in seven years, according to the February 2019 CMO Survey. On a scale of 1 to 100, with 100 being the most optimistic, marketers say they are now on the fence about the U.S. economy. CMOs ranked their optimism on average at 57.0, a 21%% drop from the 68.9 score we reported one year ago.

The bad news continues. Whereas last year 11.8% were less optimistic than a year ago, now 56.2% feel less optimistic. On the other hand, just 20.1% of marketers say they were more optimistic at the end of 2018 heading into 2019, compared with 51.2% who felt the same at the end of 2017 heading into 2018.

Marketer optimism in the overall U.S. economy (0 = least optimistic, 100=most optimistic)

Optimism has dropped across all economic sectors, with an incredible 80% of CMOs at B2C product companies feeling less optimistic. Marketers at B2C companies have presided over years of product innovation and have recently been driving up prices. They know that may soon change.

Marketers join CFOs in fearing economic downturn

Nearly half (48.6 percent) of U.S. CFOs believe that the nation’s economy will be in recession by the end of 2019, and 82 percent believe that a recession will have begun by the end of 2020, according to the Duke University/CFO Global Business Outlook from December 2018. Consistent with predictions of recession, the Optimism Index for the U.S. Economy slipped from 70 to 66 this quarter. The survey’s CFO Optimism Index has historically been an accurate predictor of future hiring and overall GDP growth. Interestingly, marketers appear even more pessimistic than CFOs with a drop in optimism from 68.9 in August to 57.0 in January.

Marketer optimism about the overall U.S. economy compared to last quarter

Given that two key members of the C-suite are preparing for the worst, it makes sense for companies to evaluate their growth strategies and consider how they will be affected if market demand slips, customers’ priorities shift, and capital lending requirements and budgets tighten. As The CMO Survey demonstrates, marketers are already thinking along those lines.

Customers value price over quality in 2019

Marketers expect customer priorities to change. Marketers say they expect customers in 2019 to place a stronger emphasis on price (48% increase) and trusting relationships (44% increase). Value now trumps innovation, as pressures for superior product quality have dropped by 32%.

Marketing hiring flagging as recession looms

Perhaps it is no surprise that planned marketing hiring is also in jeopardy. Whereas 2018 was a banner year for hiring, rising 7.3% over 2017, marketers only expect to increase hiring by 5.1% this year.

Another interesting finding in The CMO Survey is that only 1 in 3 marketing leaders (37%) feel their role is very clear. We believe this is because marketers are navigating a complex marketplace and touching more areas of the business than ever before, including product and service innovation, the customer experience, sales, and digital transformation, among other priorities. It’s hard to have a defined role when business models and product portfolios are in constant flux.

Marketers look homeward to domestic markets to boost sales

While companies have been focused on international expansion to grow share in countries such as China and India, these efforts have cost billions of dollars and are not without risk. Witness Amazon’s and Walmart’s struggle to compete in India amidst shifting governmental priorities and decentralized supply chains. Domestic spending is up 10% since 2012 and will consume 87% of marketing budgets this year.

Therefore, it is not surprising that CMOs are playing it safer in 2019 by focusing more budget and effort on market penetration, a lower-risk growth strategy compared to diversification or product development. Marketers note that their companies are spending 55.1% on market penetration strategies in 2019—the highest percentage in 2 years.

CMOs say: It’s time to do more with less in 2019

While no one can say when the next recession will hit (I recently was able to buy Coinbase shares UK to secure myself against it as best I can), it seems that the C-Suite is increasingly united in the desire to prepare proactively for major marketplace changes. One point of difference may emerge in that CMOs report their top challenge lies in driving growth—a challenge that will be harder to meet if markets tighten. It will be essential for marketing leaders to get closer to their customers and to continue to build marketing capabilities—already a top marketing knowledge investment—and foster customer insight. Savvy CMOs can move ahead of shifting demand by proactively adapting marketing, sales, and product strategies ahead of changing markets.

As far as doing more with less, using existing staff to handle a growing workload is a common recession playbook. Fortunately, marketing organizations have digital platforms, deep customer analytics, and cloud-based talent pools to help them accomplish their goals. It may require more effort, but it is doable.

Learn more about CMO expectations for 2019 and sign up to participate in the next survey.