A Basic Guide for Planning Your Digital Marketing Budget
You can’t just have an open fund policy for your digital marketing expenses. This will lead to you spending more than you should on your marketing. Not to mention, it will prevent you from wasting funds on an untested marketing channel. Moreover, planning your digital marketing budget before starting your new campaign will ensure that you have enough funds for all your channels throughout its duration and some unexpected expenses.
Aside from these, planning your marketing budget will help you track your spending on each channel for future planning of your next campaign. This will help you identify the ROI of each channel and give you an idea if you should increase, maintain, or reduce your spending for a particular channel.
So, how to create digital marketing budget? Read on to find out.
How Much to Spend on Digital Marketing?
What percentage of the marketing budget should be digital?
What You Need to Know for Creating a Digital Marketing Budget
Your current digital marketing costs and revenue
When setting your marketing budget in the future, you must first look at the business’ current situation. Determine how much you are spending on marketing and how much you are receiving in return for what you spend. Here are some points to consider when evaluating your current digital marketing budget breakdown and the revenue you derive from each part:
- How much are you currently spending on digital marketing?
- How much are you spending to convert each customer?
- How much revenue does each marketing channel earn?
- How much is the return on investment from your current marketing spending?
- Are you spending too much or too little on marketing compared to how much you are earning?
From here, you will know if your spending on marketing is providing the returns that you can expect. You can see which digital marketing channels are too expensive for the meager amount of revenue it brings, or underutilized with how much revenue is bringing into your business.
Your results from your previous digital marketing campaign
What you find out how much each digital marketing channel costs and earned you is not enough. A good digital marketing budget plan example looks into how each one affected your goals and key performance indicators (KPIs) in the previous digital marketing campaign. You will want to scale up your investment on channels that performed well.
As for those that underperformed, you must first evaluate what went wrong. If the channel did not perform due to the strategy, it might be best to approach it differently in the next campaign. However, if it underperformed due to the market’s lack of or poor response, it might be best to cut back your investment in it or remove it completely from your strategy.
Your digital marketing goals and KPIs
Before you can set your budget into paper for your digital marketing strategy, you must first determine its goals and an idea of how you will go about achieving them. It is better to make said goals measurable with key performance indicators like ad impressions, email leads, sign-ups, downloads, purchases, and inquiries.
These will help identify the digital marketing channels you will use if you are starting from scratch. Otherwise, it will help you identify which channels require more funding, which ones you need to maintain the same spending, and which ones you can eliminate from your budget.
The industry you are in will affect how much you will be spending for marketing your business on the internet. You will notice this when the business is interacting with its customers. If they are an online business, they will focus their budget on digital marketing. On the other hand, if they are an offline business like a restaurant or a contractor, they will not have to spend as much as an online business on digital marketing.
Aside from this, you will also have to consider the nature of your business, the KPIs, and effective marketing channels in your industry. The unique characteristics of each industry entail different considerations when budgeting for your digital marketing strategy. For instance, B2B businesses require a longer time before they can convert their leads into customers and this leads to them spending more time and money to achieve this.
Your target market
Your target market will have a significant effect on how much you need for your digital marketing budget. This is evident in businesses with a target market located in a highly competitive area. Their organic marketing strategies will have to keep up with the competition, which means spending more to generate more and better quality content. This is the same for their paid digital marketing strategies since most online advertising platforms have their users bidding for ad placements since higher demand will always increase the price for each click or per 1,000 impressions.
Your digital marketing strategy
In the marketing profession, there is a principle known as the 70-20-10 rule. This rule provides a guide on how you should prioritize your business’ marketing activities. You can use this as the basis for deciding how to split your digital marketing budget on each channel or objective. Here is how each part of the digital marketing budget allocation will be used.
- Seventy percent of the budget – This portion is spent on strategies that you know work well for your business. These marketing methods are safe investments for your business and have proven to work based on your experience or industry standards. This part of your budget is for hitting your general marketing goals and sustaining your business’ profitability.
- Twenty percent of the budget – This part of your budget is allocated for new strategies in your business. These strategies aim to grow your business by either introducing new products or services to your target market or expanding into a completely new market segment.
- Ten percent of the budget – This part of your digital marketing budget plan is spent on new marketing strategies that you do not know will work for your business. Although it poses a risk to your business, pursuing experimental strategies or testing new ideas is important if you want your business to stay ahead of your competition.
From this, you will know how to allocate your digital marketing budget accordingly. If you are still having difficulty, it might be better to consult a digital marketing professional to ensure everything is in line before proceeding with your campaign.
Seasonal and special promotions and events
Your marketing budget should also include the promotions and events for national, cultural, religious, or seasonal occasions you will have to engage your target market. Although these types of promotions and events are for B2C customers, you will still have to account for these occasions even if you are a B2B business. This is evident with the higher spending B2B business in pay-per-click advertising during the last quarter of the year since other businesses are aggressively promoting their business online.
Allowance for testing and scaling a digital marketing method
You need to make room for testing and experimenting in your digital marketing budget plan. This is important whether you are just starting with a new digital marketing channel or continuing the use of a channel for your latest campaign. For those starting from scratch, you will have to tweak some variables before you can find the best set-up that will work for your business. As for those who already have it figured out, there is still the possibility of retesting when variables and results veer away from what is expected.
Also, you never know if your marketing strategy becomes successful beyond your expectations. When this happens, your best approach is to upscale your spending to make the most out of it. The last thing you want is to have insufficient funds in your budget when this rare opportunity occurs.
What Marketing Strategies to Include in Your Marketing Budget
1. Search engine optimization
- Targeting the keywords they use when looking for information about the products or services you offer
- Analyzing search intent and consumer queries for more valuable and more compelling content
- Using these keywords to create valuable content for your target audience
- Improving the user experience of the visitor
- Optimizing the web design for the search engine algorithms
- Completing local business profiles to optimize for local search
SEO is one of the most important digital marketing strategies since most internet users start their online browsing through a search engine. This is evident with search traffic contributing an average of 50 percent of a website’s total traffic. This figure can go up to 90 percent when a page reaches the top of its target audience’s search engine results page.
2. Email marketing
3. Pay-per-click (PPC) advertising
4. E-commerce marketing
5. Marketing automation
- Running email marketing campaigns
- Personalizing the email marketing campaign of your leads
- Posting social media content
- Tracking online buyer journeys
- Scoring online leads
- Segmenting your audience
- Tracking the revenue, conversions, or returns from your marketing channels
- Customizing your audience’s user experience on your website
This is one consideration in your digital marketing budget that will help most, if not all, of your digital marketing strategies. Automating your marketing tasks will save you time and improve the accuracy of your reports. Therefore, as long as you have the funds, it is best to use marketing automation tools for the channels you have been using ever since.
Best Practices for Creating and Following Your Digital Marketing Budget
Use all relevant information as the basis for creating your budget
- Previous marketing expenses
- Revenue of your marketing channels
- Results of your previous marketing campaign
- Your digital marketing goals
- Your digital marketing KPIs
- Your target market
- Your industry
- Your digital marketing strategy
- Important marketing events for your campaign