Flat Budgets Don’t Kill Brand Strategy. Misallocated Ones Do

The data landed in May and has been circulating ever since.

The 2026 Gartner CMO Spend Survey polled 401 senior marketing leaders across North America, the UK, and Europe. What it found was not surprising to anyone running a brand right now. Marketing budgets are effectively flat. Expectations are not.

Marketing spend sits at 7.8% of company revenue, up a fraction from 7.7% in 2025. Meanwhile, 72% of CMOs describe the growth expectations placed on their marketing function as high, very high, or overly ambitious. The gap between what they are being asked to deliver and what they have to work with is real, documented, and getting harder to close.

What is more revealing than the budget number is where the money is going. CMOs are cutting agency investment to fund paid media, which now accounts for 31.4% of marketing budgets. And while that reallocation might feel like a rational response to pressure, the confidence numbers suggest something has gone wrong in the process. CMO confidence in achieving brand awareness fell from 57% to 49% year over year. Confidence in campaign impact dropped from 58% to 46%. Confidence in delivering ROI fell from 56% to 43%.

That is not the profile of a budget under pressure. That is the profile of a budget being misallocated.

The Cut That Feels Logical in Q1 and Costs You in Q3

When a CFO asks a CMO to find efficiencies, the first place most CMOs look is agency fees. Strategy retainers feel abstract. Creative development takes time to prove out. Paid media has a dashboard. The logic of cutting the thing that is harder to measure in favor of the thing that has a weekly report attached to it is understandable. It is also how brands end up running disconnected campaigns that do not build anything.

Brand strategy investment is not one line item among many. It is the foundation that determines whether every other dollar in the budget is pointed in the right direction. When you cut strategy, you do not save money. You transfer cost. The campaigns get more expensive to produce because each one has to rebuild context from scratch. The creative gets less coherent because there is no platform tying it together. The paid media gets less efficient because it is not reinforcing a consistent brand idea. The customer acquisition cost goes up. The attribution story gets harder to tell.

None of that shows up on the spreadsheet in Q1 when you make the cut. It shows up in Q3 when the numbers do not move.

What the Gartner Data Is Actually Telling You

Read the Gartner findings carefully and the picture is clear. CMOs who have maintained investment in brand strategy and have built AI readiness alongside it are outperforming. The survey found that more AI-mature marketing organizations, which also tend to be stronger on foundational brand strategy and measurement infrastructure, are working with average marketing budgets of 8.9% of company revenue compared to the 7.8% average. They are getting more. Not because they asked for it. Because they proved it.

The trap the average CMO is falling into is optimizing for the metric that is easiest to report rather than the investment that is hardest to cut. Paid media is easy to report. Brand strategy is hard to walk away from when it is embedded in how your campaigns, identity, and content all connect.

The CMOs losing influence with their C-suite are the ones trying to defend brand budgets with reach and impression metrics. Those arguments do not land because impressions do not tell anyone whether the brand moved. Strategy-led CMOs are defending their budgets with a different story: here is the positioning we built, here is the campaign platform we developed from it, here is how every channel execution reinforced the same idea, and here is what it produced at the business level. That is a story that earns budget authority.

Strategy Is Not a Phase. It Is the Operating System.

There is a common misconception that brand strategy is something you do once, at the beginning, and then move on from. A founding document. A deck that lives in a shared drive. That version of strategy does not justify the investment because it does not earn it. It sits still while the market moves.

Real brand strategy investment is ongoing. It is the continuous process of knowing what your brand stands for in the market, understanding how that position is holding or shifting, and making sure that every campaign, every piece of content, and every brand expression is executing against the same idea. When that work is current, campaigns get built faster. Creative decisions get made with less back-and-forth. Channel planning becomes easier because the question is not which channel to use but how to express the same idea in each context.

The brands that compound equity over time are not the ones that spend the most. They are the ones that spend coherently. Every dollar goes further when it is aimed at the same target. Strategy is what keeps the aim consistent.

The Agency Efficiency Argument That Backfires

Here is where the Gartner data gets uncomfortable for agencies and brands alike. CMOs are cutting agency spend to fund paid media because they see agency relationships as overhead. That perception is sometimes accurate. An agency that cannot tie its work to commercial outcomes, that operates on a model of producing deliverables without connecting to business strategy, deserves to be cut.

But the correct response to an unaccountable agency relationship is not to eliminate external strategic capacity. It is to replace the wrong agency partner with a better one. CMOs who cut all external brand strategy investment and try to replace it with internal teams running paid media are solving the wrong problem. They are removing the strategic discipline that makes the media spend coherent.

The agency partners worth keeping, and worth paying for, are the ones who do not separate strategy from execution. The ones who build the brand positioning and then execute the campaigns that flow from it. The ones where the strategist who developed the brand idea is the same person reviewing the campaign creative and the content plan. That integration is not a premium service. It is the thing that makes every other service worth the cost.

At Agency Squid, brand strategy and creative execution are handled by the same senior team from brief through delivery. That is not a pitch line. It is a structural decision that eliminates the translation loss that happens when strategy gets handed off to a separate creative team, and that creative then gets handed off to a separate production team. Every handoff costs something. The integrated model is how you protect the idea all the way to the final asset.

What CMOs Should Actually Protect When Budgets Compress

If you are reading this in the middle of a budget review, here is a practical framework.

Paid media without a strong brand foundation has diminishing returns. You can buy reach, but if the brand behind the ad is not clear, consistent, and credible, the reach does not convert to equity. Every time you stop spending, the brand fades. That is expensive media for a temporary effect.

Brand strategy investment, done well, compounds. A clear positioning held consistently across campaigns builds mental availability over time. Consumers start to recognize the brand without being prompted. Trust develops. Purchase decisions get easier. The cost of acquisition comes down. None of that happens if the positioning shifts with every budget cycle or gets deprioritized in favor of this quarter’s performance target.

The practical implication is this: protect the work that builds the foundation. The positioning. The messaging hierarchy. The creative platform that campaign work executes against. Those are not luxuries that get cut when times are tight. They are the multipliers that determine how far every other dollar goes.

Cut the freelancers who are not building anything. Cut the agencies that cannot tell you what business problem they are solving. Cut the tactics that are disconnected from a coherent brand idea. But hold the strategy work that gives everything else direction.

The CMOs Who Will Win This Year

The Gartner data draws a clear line between two groups of marketing leaders. One group is cutting brand investment to chase short-term performance metrics, watching their confidence numbers fall, and building a case for further budget cuts with every quarter that underperforms. The other group has maintained the strategic foundation, is connecting brand investment to business outcomes in the language of the CFO and the board, and is gaining influence rather than losing it.

The difference between those two groups is not budget size. It is discipline. The discipline to protect the investment that is hardest to measure but most important to hold. The discipline to build campaigns that compound rather than reset. The discipline to demand that every agency dollar goes toward a partner who connects strategy to execution and can prove it.

Flat budgets are a constraint. Misallocated ones are a choice.

If you are evaluating how your agency investment is working right now, and whether it is earning its place in a compressed budget environment, that is a conversation worth having before the next planning cycle. Agency Squid builds brand strategy that makes everything downstream more efficient. See how we work here.