6 Easy Steps to Allocate A Digital Marketing Budget for Your Business
To most startup and small business owners, allocating a digital marketing budget may seem like a mystery. One of the questions we get asked a lot is: ‘How much budget do I need to spend on digital marketing?’
Many experts suggest you should spend between 5 to 15% of your revenue on marketing, and 10 to 50% of your marketing budget should go to digital. But if that seems like a very broad range, here are 6 steps to help you narrow it down and determine a digital marketing budget for your business.
Step 1: List Your Goals
The main goal of every digital marketing plan is to increase sales, both in the tactical and strategic terms. In the short term, sales can be increased by running advertising campaigns, such as PPC or Facebook ads. However, you need brand recognition and awareness too if you want to grow strategically. So, your digital marketing has two major goals.
- To increase sales
- To increase brand awareness
You can further break down these goals into multiple sub-goals or tasks, such as:
- Increase website traffic
- Improve conversion rate
- Retarget lost visitors
- Create a sales funnel
- Grow social media followers
- Engage more customers
- Get more content shares
- Increase ad impressions
This exercise will help clear your mind and make you think about your priorities. Also, think about how important digital marketing is for your business and what percentage of your overall marketing budget you would like to spend on digital marketing.
Step 2: Drill Down to the Details
Next, you can analyse each of your sub-goals or tasks and list the options you have to accomplish them. You should also quantify the sub-goals at this stage. For instance:
Task: Increase website traffic by 50%
SEO, PPC, Social Media, Email Marketing
Task: Increase Conversion Rate
Create New Landing Pages, Revamp Website, Design a Sales Funnel
Task: Increase social media followers by 50%— say for Facebook
Regular Updates, Boosted Posts, Viral Videos
This will tell you the channels and activities that you can use for achieving your goals. But it might not be possible for a small business to target all channels, which is why you need to prioritise.
Step 3: Select the Best Channels
This is easy if you’ve been spending on digital marketing in the past. Analyse past data to determine what worked best and what didn’t. How much did you spend on each channel and what were the results? Which activities should you spend more of your budget on and which ones can you afford to skip?
But if this is the first time you’re going digital, you can conduct some quick market research to find out the most promising digital marketing channels and activities for your business. Here are three simple ways to find out:
1. Competitor Research
See which channels your competitors are spending most of their budgets on.
2. Customer Discovery
Find out the online places where your customers hang out. Do they read blogs or watch videos or both? Are they on social media a lot? Who are the influencers they follow?
3. Keyword Research
What are the major keywords that are driving traffic to websites like yours? What’s the competition for these keywords? What are the average bids? This exercise will help you decide if, and how much, you want to spend on PPC or SEO, and on which keywords.
Here’s a list of possible digital marketing channels and activities that you can choose from:
- Search Engine Optimisation (SEO)
- Conversion Rate Optimisation
- Paid Search (PPC)
- Display Advertising
- Social Media (Facebook, LinkedIn, Twitter, Instagram, YouTube, Pinterest, and other networks)
- Email Marketing
- Content Marketing
- Mobile Marketing
- Video Marketing
- Press Releases
Step 4: Determine Cost of Marketing Activities
After shortlisting the most promising channels by looking at your past campaigns and/or through market research, now is the time to introduce the cost into the equation. This will help you determine how many and which channels you can afford. Remember that it’s more effective to have a strong presence in a handful of places than to have a thin presence on every channel.
For instance, you might think a video will be a very effective channel, but do you have the resources to produce high-quality interesting videos that get shared a lot? It might be better to send out a strong email than share a weak video.
Find out the average cost per click if PPC is among your selected activities. How much are the agency costs if you’re targeting SEO? What would be the likely cost of gaining 1000 Facebook followers through advertising (if you’re going for Facebook marketing)?
Next, you need to have an idea about how much of each activity you’ll need to conduct in order to achieve the tasks that you shortlisted. How many months of SEO before you can increase traffic by 50%? How many PPC campaigns or social media ads would you need per week, month and year?
Step 5: Estimate Your Budget
You might think this is the tricky part, but it really isn’t if you apply one of the following simple methods of budgeting.
Affordable Method: It’s the simplest method of budgeting in which you just estimate how much you can afford to spend on digital media. It’s a rough estimate that is largely subjective, so the method cannot be called scientific. However, it’s a good method for startups that are sticking their toe into digital media for the first time.
Percentage of Sales Method: A percentage of last year’s sales or next year’s projected sale is allocated for digital media. Conventional wisdom hints at 10% of sales as your total marketing budget. Input your annual sales and you get a number for your annual digital marketing budget.
Competitive Parity Method: As the name gives away, in this method you estimate what your competitors are investing in digital marketing and try to match that number.
Objective and Task Method: You determine your objectives through in-depth market research and decide how much you need to spend in order to achieve those objectives. This is the most logical method of budgeting; however, small businesses and startups might not possess the resources to conduct the kind of research required for this method to be effective.
Once you have determined your budget, you’re ready to allocate it to your selected marketing activities and channels. Allocate more to the marketing activities that are likely to work better than others, just like we discussed in Step 3.
Step 6: Measure Results
Your marketing budget is not set in stone. You can change the allocation of different activities or your overall budget depending on the response you’re getting. But, that would be possible only if you’re keeping an eye on the results. Track your performance continuously and hold a monthly or quarterly review with your associates. Remember, what gets measured gets done!
If you have a marketing budget in mind and want to get started, we can help you with your digital marketing efforts. If you are just joining the digital marketing game, we can even help you set up a budget and channelise your efforts. Whatever be the case, the idea is to increase your visibility and get more sales for your business.