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?

On average, businesses spend around 7 to 10 percent of their total revenue on general marketing expenses. If the business provides B2B products or services, this average can jump up to 10 to 12 percent due to the nature of marketing to B2B customers.

What percentage of the marketing budget should be digital?

As for the average digital marketing budget, it is a third up to half of their total marketing budget. But, for e-commerce businesses and others with a higher priority on internet marketing, their spending is much higher at around 50 percent or more of their total marketing budget.

Although these are only averages, you can use these figures as the basis to determine if you are spending too much or too little in your traditional or digital media marketing budget.

What You Need to Know for Creating a Digital Marketing Budget

Knowing how much businesses invest in their digital marketing budget is a good benchmark if you are spending too much or too little on your digital marketing. However, you will have to dig deeper into your business’ unique situation to determine the exact amount you need for marketing your business online. Here are some considerations to help you figure out how to calculate your 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.

Your industry

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

If you are just starting with a digital marketing strategy, it can be quite overwhelming in deciding how to spend your digital marketing budget with the available options you have. Unfortunately, you cannot include all of these into your strategy since you do not have an unlimited digital marketing budget. To help prioritize your allocation of funds, here are some strategies that most businesses include in their digital marketing budget allocation:

1. Search engine optimization

SEO, or search engine optimization, increases your website’s online presence by improving its ranking in the search results of your target market. This is achieved through the following:

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.

Moreover, visitors coming from their search engine results go to your website to satisfy their search or consumer intent. Because of this, they are more receptive to the message you convey through your content and are more likely to act upon the offer in your content, sales copy, or landing page.

2. Email marketing

Email marketing is a direct marketing strategy used for almost every stage of a potential customer’s sales journey. You can use it to convert leads into paying customers, maintain contact and engagement with your leads, increase traffic to your web content, and promote your regular and special offers to increase sales conversion.

Email marketing is one of the most popular digital marketing strategies. It is effective for engaging and building a relationship with your audience and prompting an action from them. Moreover, since you are messaging them in their email, you can maintain contact with them for years even when they stop using a social media platform or messaging channel. Email marketing has a high return on investment thanks to its significant revenue potential and minimal cost for implementation.

3. Pay-per-click (PPC) advertising

Pay-per-click advertising is a paid digital marketing strategy wherein advertisements are placed in the search engine results, web pages, or videos watched by your target market. You can target PPC ads toward search keywords, audience persona, location, browsing history, and content. As the name implies, you will pay for every click made on the ad and because of this, it is crucial to optimize your targeting to ensure that the ad appears to the right audience.

PPC ads are great for targeting internet users searching for terms related to your product or service. You can also use it to spread awareness of the problem you are solving or the solution you are offering by placing them on websites, pages, or videos your potential customers are likely to browse or watch. Furthermore, PPC ads are excellent for targeting those who have visited your competitors’ websites and have previously clicked your ad or visited your page.

4. E-commerce marketing

Ecommerce marketing uses marketing and promotional tactics to bring traffic to your online store. Aside from other digital marketing methods (including the ones in this list), eCommerce marketing involves various tools to upsell products, remind shoppers of their abandoned carts, and integrate your store with third-party e-commerce platforms.

If you have an online store, e-commerce marketing is an essential part of your digital marketing strategy. Implementing it will ensure that your store provides a seamless shopping experience and generates the most sales from every online shopper.

5. Marketing automation

Marketing automation is the technology that takes care of mundane and repetitive tasks in your digital marketing strategy. Some marketing tasks that you can automate include:

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

It does not matter if you are planning a digital marketing budget for a small business or a larger one. You must do it properly or your business will more likely spend more than necessary or fail to capitalize on opportunities during your campaign. Here are some of the best practices successful businesses follow when planning their digital marketing budget for the year:

Use all relevant information as the basis for creating your budget

Information is crucial for making your digital marketing budget effective. Your digital marketing budget should take into account the following items:

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

Use a digital marketing budget tracker

A digital marketing budget tracker in a worksheet will make it easier for you to plan your budget and create reports for review. To make the best use of it, make sure to categorize your spending according to the marketing channels you are using and break down the cost per individual item.

You will have no problem finding the different ways to arrange your digital marketing budget calculator and worksheet online. Just use the ones that will fit the marketing channels you use.

Schedule how you will spend your budget

Scheduling your spending will make your digital marketing budget allocation more accurate. This will ensure that you have enough funds for the seasonal highs of your campaign and that you can take advantage of the times when your customers are spending more for the products or services you offer. Moreover, you can go back to how you planned your budget over the previous months and use it to see where you will need more funds in your next planning session.

Keep track of revenue gained from each digital marketing channel

As you go through your marketing campaign, you must keep track of any revenue each channel contributes to your business. The information will help in your next planning session since it can help you identify the channels that need to increase their spending due to favorable results or to reduce or maintain due to poor revenues.

Provide an allowance for unexpected expenses

Your digital marketing budget allocation must have enough to weather any unexpected expenses due to unplanned price changes or to increase your spending to take on sudden opportunities. You will be thankful for giving your digital marketing budget this flexibility when the situation calls for it.

Be prepared to adjust your digital marketing budget

Even if you plan for the smallest detail and account for any eventualities, unaccounted and unexpected events may still happen in your marketing campaign. There will be instances when you will have to allot more funds into your digital marketing budget to adjust your strategy, capitalize on an opportunity, or continue your campaign to meet its goals.

Start Your Digital Marketing Campaign Right

Planning your digital marketing strategy and its budget is a critical step before the start of your campaign or the new year. If you have some doubts if you have the right strategy or a proper digital marketing budget template, our marketing professional here at Big Market Solutions can help you. Contact us today to schedule your free consultation session with us!

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