The old saying of ‘by failing to prepare, you are preparing to fail’ is certainly true when it comes to budgeting for business. Without a budget, businesses of all sizes may overspend or run into financial issues both short and long term.
And without a digital marketing budget, you could struggle to get the customers you need to stay in business. To ensure your marketing spend and other financials run smoothly, read this guide to learn how to allocate a budget for digital marketing, where you will find out about:
- Determining your total budget
- Allocating your budget
- Identifying marketing goals
- Researching competitors and past results
- Considering strategies, software and new technologies
Determine your budgets
Larger businesses may choose to invest between 7-10% of their annual revenue on marketing. However, if you’re a small company looking for fast growth, you might choose to spend up to 15-20% to kickstart your business venture. Decide which percentage of your revenue feels right for your business and journey, and make it your total marketing budget.
Most consumers these days are digitally savvy, using search engines to discover everything from products and services to local business information. The popularity of streaming services has made younger generations unlikely to notice TV advertising. Businesses should consider digital marketing methods to keep up with these changing customer behaviours.
In the modern business world where technology is booming, it’s a good idea to reserve half of the total marketing budget (or more) for digital solutions. You’ll need up-to-date systems to satisfy clients’ ever-changing demands. Underestimating such a crucial part of the marketing mix could cause problems in the future if you don’t have enough money in your budget to pursue new methods.
Allocate your budget
A good rule of thumb is to use the 70-20-10 rule when deciding how to allocate a budget for digital marketing:
70% of your digital budget could be spent on the strategies you know work for you and help you reach your goals.
20% of the digital allocation could be invested in new strategies that you haven’t tried before to scale your business and identify new methods of reaching your target audiences.
The final 10% of your budget could go towards cutting-edge or reactive work. Keep on top of what is new in your industry. Maybe test a new social media platform if it will contribute to your goals?
Setting aside this portion will allow you to jump on any new or emerging trends in marketing to stay ahead of your competitors. You’ll also have the flexibility to try the ‘cool new thing’ if it suits your company and learn from the experiences.
Identify your marketing goals
What do you want your marketing activities to achieve? Do you want to raise your business’ profile in your industry, or to focus on selling or making more money? There are a variety of objectives you may choose from. Deciding these first will determine which channels you use to achieve them.
Here are some goals that a business of any size may want to pursue:
- Improve sales
- Increase brand awareness
- Target new customers
- Retain more existing customers
- Grow your share of the market
- Enter a new market
- Launch new products or services
- Build business pipeline
- Increase bottom line or profits
Your marketing activity can’t do everything for you, so select a few objectives to focus your resources on and ensure the objectives are measurable so you can understand how successful you’ve been.
Research competitors and past results
Which previous marketing activities helped you achieve your goals, and which ones didn’t? If you aimed to improve sales, and found spending budget on social media ads helped you sell more products, then use this method again.
Or let’s say you spend a considerable amount on attending industry events. Did the events contribute to you selling more products? Events can be a good brand awareness exercise, but may not be as effective as achieving your sales goals. Changing your marketing activities to meet different business objectives is key here.
Consider where your competitors spend their digital budget. Are they on top of every search engine? They may have invested heavily in an SEO (search engine optimisation) or PPC (pay-per-click advertising) strategy. Find out what works for them and decide if you need to spend there, too.
Consider strategies, software and new technologies
To break down your digital budget, consider which of these digital channels will be most effective for your goals:
- Content marketing
- Social media
- Web design or CRO (conversion rate optimisation)
- Display advertising
- Digital events or webinars
- Online PR
Let’s say you want marketing to increase your brand awareness. You may invest time and resources into online PR and social media strategies. These channels will build trust and familiarity amongst your current following, and find new audiences for your business.
Alternatively, if you’re focused on sales, you may invest in SEO, CRO and paid social media to improve your website results. Consumers now find new products via social media all the time. A 2019 study found that one-third of Instagram users had bought a product from an unfamiliar brand because of an ad.
If you don’t have the resources or knowledge to execute an effective digital strategy, you could consult with a marketing agency or freelancer for support at a budget that suits you.
Additionally, consider what software you may need to support your activity. This could be anything from Photoshop, a social media scheduler, or an SEO tool to help you monitor performance. Subscriptions can add up, so including these in your budget will avoid any surprise overspending.
Make it easier to run your business
Split your digital budget into the methods that work, the new strategies you’ll use, and fill out which marketing activities you’ll use for each goal. This should clearly set out what you will spend on each area.
Now that you have learnt how to allocate a budget for digital marketing, make sure you’re kept on top of the rest of your financial admin. Countingup is the business current account and accounting app that provides instant invoicing and automated bookkeeping features. It is saving business owners hours of time-consuming admin, and helping thousands keep on top of their finances. Find out more here.