Did you know that total digital ad spending will reach $129.34 billion this year? In other words, it’ll surpass traditional forms of ad spending by almost $20 billion and represent 54.2 percent of all US ad spending.
When it comes to the ROI marketers saw, content still remains king. In fact, 20 percent of digital marketers ranked it their top activity in terms of commercial impact for their business.
Rounding out the top five after content were AI and machine learning, big data, social media marketing, and marketing automation. Where do these activities fit into your current marketing budget?
If you enjoy creating a digital marketing budget about as much as visiting a novocaine-free dentist, you’re not alone.
Fortunately, we’re here to take some of the pain out of the process. Read on for a complete guide to crafting a digital marketing budget that’ll give you more bang for your buck.
The Problem When It Comes to Digital Marketing Budgets
Having a solid marketing budget isn’t a luxury or an optional function. It’s essential to your business’s marketing success over both the short and long hauls.
Yet, many small companies fail due to the lack of a firm budget. And many massive companies fail because of no flexibility within theirs. How do you avoid this conundrum?
By crafting a budget that maps out every attempt to strategize, develop, and sell a service or product. Yes, this process proves tedious and labor intensive. But it also allows you to discover new opportunities for growing your business.
Here’s where it gets problematic, though. You see, most businesses don’t make new budgets this way. Instead, they rely on one of two worn-out methods that yield poor results.
The Wrong Methods for Budget Planning
What are these faulty methods, and why should you avoid them? They involve:
- Designing a budget based on estimations
- Fabricating a budget based on the previous year’s financial snapshot
The first method bases major spending decisions on a series of speculations that may never come to fruition. In other words, you might as well hire a fortune teller to help your company do its budgeting.
And the second form of budgeting exists in the past. It thwarts a company’s ability to grow and adjust according to changing markets and new technologies.
Both approaches prove disastrous for a company. They can lead to too much spending in the wrong areas and not enough in others.
How do you avoid this nightmare?
By implementing a digital marketing budget based around specific goals over the long term. This involves creating an overall marketing strategy. Let’s dive into how devising a marketing strategy works.
What’s Your Overall Marketing Strategy?
Before you begin diving into the nuts and bolts of a digital marketing budget, you have to know why you’re doing what you’re doing. You also need to have a clear concept of what your overall objectives look like.
In other words, you need a master strategy.
Now, while this sounds like something from an episode of “Game of Thrones,” don’t let the wording intimidate you. Your master strategy will help you align your company’s overall marketing goals with those of your company’s growth trajectory.
Why does this prove so important?
Because most digital marketing strategies tend to occupy space in a few marketers’ brains without ever being shared with the entire group. As a result, execution proves poor and uncoordinated.
And members of the team may feel frustrated or unsure of their role. Instead, you’ve got to articulate your overall marketing strategy in a written format that can be shared and discussed with every level of your team.
This includes employees at the marketing, sales, and executive levels. Only then, after everybody’s on the same page, can you cooperate to ramp up growth in a realistic and attainable way.
After all, if you want to grow sales by 25 percent, spending a measly five percent of your budget on marketing won’t cut it. When everyone knows the big picture, it’s much easier to make the little parts of that picture fit into place.
Your Overall Marketing Strategy
What goes into this overall marketing strategy?
It should include all of your marketing activities from public relations and classic advertising to video marketing and search marketing.
And don’t forget the heavy hitter, content marketing.
Incorporating your digital marketing strategy within the larger context of your marketing strategy also represents a crucial component of the puzzle. After all, the internet’s now the place where everyone goes, including your potential customers.
What does this actually look like on paper? A master strategy should be organized as a hierarchy for ease of use and legibility.
How to Create a Marketing Master Strategy
Start with your overall strategy at the top and then divide this into subcategories such as “brand strategy” and “competitive positioning.” You’ll also need columns for “distribution channels” and “pricing.”
From there, list the tools that you have to meet your marketing objectives. These will include subcategories such as:
- Design and Copy
You get the picture.
You’ll also want to map out your plan for customer acquisition using subcategories and columns. This might include three subcategories to denote different marketing venues:
- Traditional marketing (e.g. events, telemarketing, publicity, traditional media, direct mail)
- Digital marketing (e.g. email marketing, social media, online advertising, SEO and SEM, content marketing)
- Marketing management (e.g.sales management, business development, customer retention)
When you organic these methods and objectives as a hierarchy or flowchart, you make the information more digestible to employees throughout your company. So, keep it simple and highly visual for best results.
Get a Handle on Your Company’s Financial Data
Once you’ve laid out your marketing process in a clear, well-defined way, start assigning numbers to it. Of course, you can’t do this until you understand your company’s current financial outlook.
You need to know exactly how much your company makes. Since profits can vary from month-to-month, always go with the minimum earnings figure. Consider any profits beyond this minimum as revenue you can’t count on.
Now calculate your company’s monthly expenses. Again, these will fluctuate. But you want to go with the highest number of expenses. That way, you’ll avoid overestimating the budget.
Once you’ve figured out your lowest revenue and your highest expenses, examine the numbers carefully. Use this to determine your company’s disposable income.
Of course, you may want to use every last cent of that income for your next marketing campaign. But remember, other departments rely on these funds, too.
Now, depending on your company’s current objectives, your marketing budget might get allocated 75 percent of that excess cash. Or, it might squeak by with a measly five percent.
Either way, you need to know exactly what you’re working with.
Start Plugging in Those Digital Marketing Budget Numbers
Alright, now you have a clear set of objectives and strategies. You should also know how much money gets dedicated to your marketing efforts. The next step involves building a budget around that figure.
In other words, it’s time to start allocating your own funds. That way, you have a clear handle on how much money you’ve been given and how it should get used. Here are some examples of a marketing budget breakdown.
With a small marketing budget, you’ll need to keep it simple. Your best bet remains sinking the majority of your budget and effort into local advertising and print ads.
For medium-sized budgets, you can throw in a few additional marketing items such as online advertising. And for the largest budgets, television and radio ads could bring significant added value.
Of course, the suggestions above should be altered based on what you’re selling and what your ideal customer looks like. Don’t take them as gospel. Instead, use them as a marketing budget example for your own enterprise.
Why Your Company Needs a Social Media Presence
But here’s one thing that holds true no matter the size of your marketing budget. You need a social media presence.
Why? Because 95 percent of young adults now follow brands via their social media channels. And by the end of 2018, social media channels boasted more than 2.5 million users!
Social media marketing allows you to reach a far wider group of customers for relatively small monetary expenditures. It can also give you more equal footing with companies of all sizes and budgets when done right.
Social media represents an excellent way to bring in a consistent flow of new leads while introducing your company and its services and products to new markets around the world.
It remains a crucial driver for more leads, customers, and growth. And if your company isn’t growing, it’s dying. Don’t let it wither on the vine.
Of course, if you have a new channel that you’ve added to your company’s offerings, then you’ll need to allocate more funding to get it up and running. Keep this in mind as you set aside money for social media.
Ready to learn more about what social media can do for your company? Check out our comprehensive guide to successful Facebook ad design.
A Marketing Budget Sample
Taking a look at what other companies are doing in your industry can give you a better idea of what your digital marketing budget should look like. But you may feel surprised by some of the numbers.
After all, digital marketing as an industry now ranks $30 billion bigger than television advertising! We can break these numbers down even further to get a sense of what a sample marketing budget might look like.
Companies spend on average 12 percent of their profits on marketing. But some industries spend significantly more than others.
For example, education companies spend about 18.5 percent versus two percent for the construction and mining industries. That said, your average industry falls between six and 11 percent.
Best Practices for Building Your Budget
Whether you’ve been allocated six percent of your company’s earnings or 11 percent, follow these general rules of thumb as you hone your budget.
Make sure that you diversify between strategies and channels. Like an investment portfolio, the five percent rule works well. Don’t put all of your marketing eggs in one basket, or they just might get crushed.
You should also reserve around 10 percent of your budget for experimentation. Do this with the overriding goal of improving ROI. If you can’t tolerate the thought of 10 percent, then kick it down to six or eight percent.
But no matter what, maintain some type of budget flexibility when it comes to trying innovative and unprecedented marketing tactics. Otherwise, you’ll never happen upon new and better marketing strategies.
After all, marketing is far from an exact science. Sometimes it requires a little guesswork or a leap of faith based on your understanding of your ideal client and what motivates them.
Trim the Fat and Think About ROI
At the same time, review what you’ve done in the past. But don’t get nostalgic.
If you find an area that’s underperforming, cut it ruthlessly. If it doesn’t work, get rid of it. Period.
Always keep your eyes open for ways to trim the fat. Spending less to achieve the same results increases your ROI. It also liberates funds for new areas of your marketing budget.
Finally, keep tabs on your ROI. While calculating these figures can get complicated, you need a ballpark idea of how each of your strategies is performing. That way, you can quickly assess what’s fab and what’s flab and make decisions accordingly.
Your Digital Marketing Budget
But what happens if your digital marketing budget gets cut at some future point? Then, select your highest-earning ROI strategies and list them. Do everything you can to protect them while sacrificing what remains.
That way, you’ll remain financially solvent yet continue to attract lots of new leads and customers. The bottom line remains building your budget on a solid foundation of fundamentals so that you can deal with any budget amount thrown your way.
Looking for more ways to ramp up your leads and increase your conversions? Read on to learn more about how data can improve your marketing strategy.