There are very few businesses that can thrive, or even survive, without digital marketing. In the modern age, almost everyone functions online and buying decisions as diverse as which car you buy and where you buy your coffee almost always involve an online search. To grow your business constantly, it is important that you set up a budget for your digital marketing expenses and work out exactly how much you can afford. Some businesses scale too quickly and find themselves struggling, others don’t grow at all and the business owner can find that they have to close. Below, we explore the best methods for creating a budget for digital marketing expenses. There are plenty of places where you can spend your money, and even small budgets might be enough to help your business to reach the next level if you target your audience correctly.
Know your Costs and Revenues
To evaluate your marketing budget, you should be aware of your company's costs and revenues. It’s vitally important that you know exactly where your business sits in terms of the money coming in and the money going out. If you are not making a profit, that doesn’t mean you can ignore marketing, as it may be your ideal way to grow the business, but you also can’t spend all of your money or get into huge debts spending on marketing if you don’t get a return. Costs are things that your business has to lay out every month. Things like rent, hosting expenses, and staffing. These tend to be relatively stable and easy to work out. Some businesses can also forecast their revenue. If you’re in profit, you may be in a good position to increase the marketing budget and continue to grow. All of this is a little bit abstract until you apply it to your business. An outlay of around 10% of your business revenue for marketing activities is normal. This is just a ballpark figure, and some business models require much less, or much more.
Align your Goals with your Company’s Strategic Goals for Growth
There’s no point in marketing just for the sake of it, and using marketing tools that don’t make sense for your business. For instance, if your business is seasonal, there may be little point in doing any advertising in the off-season. Similarly, if you are focusing on one specific geographical location, there’s no point at all in focusing on the others for marketing. Putting your marketing budget towards advertising to the whole state would be unwise when you can target it at local growth. Virtually all businesses have “KPIs” relating to growth. What is the strategy? What sort of growth do you want to see? If you’re running a restaurant this could be as simple as the number of people arriving at your door asking for a table. For other types of business, the KPIs can be more complex. Do you want to focus on more blog readers who you may convert to customers later? Some businesses will be focusing on signups, or something as simple as web traffic or rankings in search engines.
Identify your Marketing Objectives
What do you want to achieve with your marketing? Are you looking to grow a mailing list to send out offers? Are you looking to just build awareness of your brand? Are you looking to make online sales? All of this will inform your digital marketing expenses. For instance, just building brand awareness is great, but it doesn’t necessarily bring you back any quick financial returns. This means that you need to be cautious about throwing a lot of money in this direction in the early stages of your business. Alternatively, types of marketing that can bring you a clear ROI, such as advertising on Facebook and convert directly to sales, may be a great way to build your revenue. Whether you are marketing using a short-term or long-term strategy is a huge consideration, along with the location in which you are advertising, and what areas of your business you want to grow. Rather than just plowing in and investing a lot of money in advertising, you need to strategize first.
Audit your Past Results
Before crafting a new strategy, you want to perform a thorough digital marketing audit of your previous campaigns. This is one of the keys to understanding your business, your customers, and their behaviors. Past results are the best indicator of what is working, and being able to access and analyze how marketing campaigns have worked for your business before means that you can have some clue what is going to work for the future. One of the best ways to do this is by ‘split testing’. Even if you don’t have a lot of historical data, you can create data to analyze by choosing a couple of methods, or even simple tweaks, and collecting data on which converts more. It’s much easier to do this with digital marketing. One obvious example is the use of graphics in advertisements. Some graphics naturally perform better and get more clicks per thousand views or more conversions as a result. The data you collect when you are spending money on advertising is essentially important. You need to make sure you use this to inform whatever marketing activities you are moving onto next. Auditing your past results means spotting patterns, looking at what worked and what didn’t, and coming up with a plan for your next marketing campaign. Because every business is unique, what works well for one may not work for another. Even looking at case studies and seeing what other successful businesses are doing isn’t enough to make certain that your own business will be a success. Your most valuable data will always be the data you collect from your marketing activities. As well as auditing and analyzing yourself, you can work with marketing professionals to try and establish what is going wrong (and what is going right) when you part with money.
Evaluating your Options
What are the options you have as a business? It is time to think about all the different types of digital marketing and where you spend your money. The channels that bring you the best ROI can vary hugely depending on your target market and the industry you are in. Before you start to funnel money into advertising, think about where you can advertise and find potential new clients and customers. Options for digital marketing include pay-per-click, Facebook advertising, blog content, search engine optimization, email marketing, and even private advertising on blogs. For instance, a local business may get a great return using a local publication or website, but if you are looking at a national campaign, you’re usually going to be better off focusing on broad, national strategies. Huge companies like Facebook divide opinion, but when it comes to advertising you will struggle to find a larger customer base, and you can target ads to an unbelievable degree.
Allocating your Budget
To know how and where to allocate your budget, I recommend you apply the flywheel thinking to your company's budget. It is usually a good idea to take the approach of spending in multiple channels. This means that you need to work out what budget you are going to spend in which areas. For instance, let’s say you are trying to drive traffic to a blog. If you split your money between advertising the blog itself via sponsored posts, it won’t make any difference if the content and graphics don’t look good. This means you need to split different pots of money and spend them on different marketing activities. 10% is a benchmark, as already discussed. However, this will probably need to be split into multiple marketing activities for the best results.
Marketing Software
A lot of people don’t realize just how helpful marketing software can be when it comes to digital marketing . There are several different options for automating workflow, collecting data, and even streamlining tasks to reduce the hours an employee spends working on your marketing. Examples include: • Social media management software to automate tweets or marketing campaigns. • Email marketing tools to send out group emails. • Content creation tools to make it easier to make videos, graphics, and blog posts. • Analysis software to collect and manage the data that comes from your digital marketing campaign. This software is not necessarily reserved for huge companies, either. A lot of smaller businesses can benefit from simple commercial software.
Creating a Budget For Your Digital Marketing Expenses
The bottom line on digital marketing expenses is that every business has its own unique needs. This makes it virtually impossible to come up with a one-size-fits-all solution. However, it does present an opportunity. For those who analyze their spending and digital marketing activities, and are smart about how they approach promoting their business, there is always a chance to grow. Digital marketing expenses are not the same as some other fixed costs in your business, they’re an opportunity to constantly tweak and get the most out of your activities. While many businesses spend between 8% and 15% of revenue on marketing, there’s a chance you can make a success spending more (or less). With Growth Hackers' digital marketing services, we help businesses from all around the world. We don't just stop at brand awareness and exposure, we work on their lead generation and sales processes so they can build strong brands while increasing their revenue and profits. Do you want your brand to strive, succeed and within your budget? Contact Growth Hackers today if you want to enhance your social media strategy and propel your business so we can start discussing about your brand, your strategy and how we may be able to help you grow, scale and succeed.
Lidia Staron
I am the Head of Content at Open Loans. As a financial advisor and former financial planner at an insurance company, I know that life is full of major events and challenges. I enjoy helping people navigate through important financial decisions while avoiding common mistakes.
