As a business owner, are you considering investing a portion of your corporate budget into digital marketing?
Even if one of the departments at your company has been managing email marketing, social media marketing, and posting blog articles on your website, it might not be enough.
Unless you allocate a reasonable budget to marketing your brand, the digital marketing efforts at your company are probably not going to deliver results.
There’s no alternative to getting serious about professionally marketing your business online, but what if you have no idea where to start?
Should you hire an in-house marketing team? Should you outsource your digital marketing to an agency? Most importantly, what is it really going to cost to launch digital marketing campaigns that successfully expand your customer base, retain loyal customers, build brand presence, increase revenue, and ultimately deliver a worthwhile return on investment?
If these critical questions have crossed your mind, then you’ve come to the right place.
In this article, you’ll learn how to plan a marketing budget that will work for your brand, as well as learn about:
● Why you need a marketing budget
● How to plan your marketing budget
● Specific digital marketing campaigns to fund
● The benefits of hiring in-house marketers vs. working with a marketing agency
● How to determine your overall marketing budget
Sounds like a lot of ground to cover, right? We’re going to lay it all out as concisely as possible, but if you already foresee that doing the legwork of calculating your marketing budget and appropriately allocating funds is too much for you to tackle, then give us a call and let the digital marketing specialists at FTx 360 develop a personalized budget for your company and handle the execution of your campaigns for you.
In general, a budget is an estimate of categorized expenses for a project or a fixed duration of time. A digital marketing budget retains the same definition, but has the potential to become extremely complex, depending on the number of marketing categories, or campaign types, and revenue goals.
Meaning, funding your digital marketing campaigns really shouldn’t be an expense, but rather an investment. For example, if you invest $X, you should see a return of at least 100% to break even. Once your marketing campaigns have been running for a while, the campaigns themselves should generate the necessary revenue to fund the continuation of the campaigns.
The real question is where is the original $X budget coming from? Your surplus of business revenue. How long can your business revenue surplus reasonably support the initial period of campaign investment? At what point in the marketing timeline must you begin to receive a financial return that’s directly derived from the campaigns themselves? These are important variables to understand before you commit to a specific digital marketing campaign or set of campaigns.
Budgeting enables business owners to create a realistic spending plan for their invested funds. Building a budget will help you wrap your mind around the overall costs of your digital marketing endeavors and understand whether or not your current cash flow can support such endeavors. The process of putting your budget together also takes research.
It might be glaringly obvious to you that investing in a daily bid of $100 for your joint Facebook and Instagram ad campaign will render an expense of approximately $100 per day—duh!—but have you calculated the production costs of producing a 7-second ad in the first place? Have you forecasted potential revenue projections, and can you approximate when the ad will begin to pay for itself? Who is going to manage the ad, and how much will it cost to pay that person?
There’s no getting around calculating your digital marketing budget down to the letter, which could include generating sub-budgets per campaign type if you’re planning on running multiple campaigns simultaneously such as a joint Facebook and Instagram campaign, a Google AdWords campaign, a native ad campaign that appears on the digital signage systems of local businesses in your area… you get the idea. If you’re planning a massive marketing launch with five different campaigns, you need to develop one massive budget that allocates funds to five different campaigns.
Doing so is imperative if you want to:
● Stay on track financially
● Allocate funds to the right places
● Set reasonable benchmarks and attainable goals
● Accurately project long-term ROI
● Appropriately invest in your business’s growth
● Minimize risks and maximize ROI
In order to plan your digital marketing budget, you first need to understand two key variables, which are your funds and your goals. How are you going to fund your marketing campaigns? Where is that money coming from? And how much is it? You will either fund your campaigns using cash from your revenue surplus, your own cash as a capital investment, credit from a financial institution, or cash from an investor, business partner, friend, or family member. If you’re borrowing money, then interest percentages and payment plans must be factored into your budget.
The point is that the budget is a fixed amount. Whether a fixed monthly amount or a fixed amount for the entire marketing campaign, you have a hard cash value that your expenditures cannot exceed. Once you’re clear on that, you must clarify your marketing goals. What results do you expect from investing in a marketing campaign or set of campaigns? Common digital marketing campaign goals fall within the following categories:
● Increasing sales
● Collecting leads
● Building a subscriber list
● Gaining social media followers
Be mindful, however, that these are categories and not measurable goals. Your goals must be as specific as possible and could look something like this:
● Increase sales by at least 15% during the next fiscal quarter
● Collect at least 500 leads of which 12% sign contracts by the end of the year
● Add 50 subscribers to your newsletter list, per month, for the next six months
● Gain 1,000 social media followers per platform within 90 days
The specific answer to this question will depend on the total budget you’re working with as well as your digital marketing goals. Some campaign types are more affordable than others, while at the same time, you may have to rule out certain campaign types because they aren’t designed to support your goals. For example, if you’re focusing on generating leads, then a native ad isn’t going to help you, but a Facebook ad that includes a lead generation form will.
The following are the types of digital marketing campaigns to consider:
● Email marketing campaigns
● Social media ad campaigns
● Pay-per-click advertisements
● Content marketing
Email marketing campaigns can work great in terms of increasing sales, because you can directly market your latest products and services to your subscribers. Also, if you run a lead generation social media ad campaign, you’ll probably follow up with your leads via a coordinated email campaign.
Pay-per-click advertisements, such as Google AdWords and other native ads that appear on search engines, are great for building brand awareness, driving website traffic as well as increasing in-store sales, and can be especially effective for businesses who are interested in attracting attendees to an upcoming ticketed event.
Content marketing includes organic SEO strategies like regularly publishing blog articles, revamping your website, and using traditional PR outreach to expand your customer base, all of which could be good options for business owners who are looking to grow their brand and elevate their clout within their respective industries.
If you’ve made it this far reading our article and wrapping your head around planning a marketing budget, it’s time to determine whether you should assign digital marketing work to your current employees, hire marketing professionals to work in-house at your business, or outsource your digital marketing campaigns to a marketing agency. Deciding which direction you go in will impact your marketing budget. Will hiring a new employee to handle 100% of your digital marketing in-house be more cost effective than partnering with a digital marketing agency? Maybe… But then again, maybe not. Let’s take a look.
Firstly, let’s all agree that parceling out the digital marketing responsibilities to your current employees is the worst option. As we mentioned at the top of this article, when current employees who aren’t die-hard digital marketers are expected to handle your marketing, they will treat those tasks as an afterthought and be lackluster in their work. So, really you need to examine the pros and cons of hiring a new employee or team of employees to market your brand, and weigh the results of your examination against the pros and cons of partnering with a marketing agency.
Financially speaking, hiring a new employee will bring a fixed cost to your budget based on the employee’s salary. Some business owners assume that hiring an employee will be less expensive than working with a digital marketing agency, and at face value, they’re correct. But remember, funding your digital marketing should be considered an investment, not an expense. Will a new employee have the talent, skills, and decision-making acumen to ensure that their digital marketing campaigns deliver an impressive ROI in the form of increased sales?
Alternatively, will a digital marketing agency deliver the kind of ROI you’re hoping for? The raw cost of each digital marketing service might be transparently advertised on an agency’s website, but what is the reality going to be when you get the bill? You might need to pick up the phone and call around town to gather accurate estimates based on your business, industry, and expectations.
Otherwise, the costs of services could range as widely as follows:
● SEO services: $500 – $20,000 per month
● Pay-per-click ads: 5% – 20% of monthly ad spend
● Content marketing: $2,000 – $20,000 per month
● Social media marketing: $250 – $10,000 per month
● Email marketing: $300 – $2,500 per month
There are some basic guidelines you can use to determine the size of your overall digital marketing budget, which are based on business size and industry. This budgeting strategy allocates a percentage of a company’s revenue to marketing. The following is a breakdown by industry that you might find relevant:
● A consulting services business will spend 21% of its revenue on marketing
● An educational institution will spend 3% of its revenue on marketing
● A financial institution will spend 8% of its revenue on marketing
● A manufacturing company will spend 13% of its revenue on marketing
● A retailer will spend 14% of its revenue on marketing
In addition to your specific industry, the age of your business will also factor into how much you should spend on marketing. For example, startups between one and five years old should invest 12% – 20% of their revenue towards their digital marketing campaigns. Whereas businesses older than five years can invest far less, between 6% – 12%, because they’ve already built up a solid customer base.
An aspect we haven’t touched upon yet is the target cost for acquiring a new customer, which is a variable you’re going to need to calculate. You’ll also need to estimate how many new customers you want to gain as a result of your digital marketing campaign. At the risk of sounding overly technical, here are a few equations you can use to calculate your digital marketing budget:
● Monthly marketing budget = (customer acquisition cost × # of desired new customers) + marketing operational overhead costs
A typical list of marketing overhead operational costs that will impact your marketing budget include:
● Research, design, & development
● Website or eCommerce setup and maintenance
● Marketing automation tools
● Travel expenses and business meals
● Video conferencing and webinars
● Video production costs
● Graphic design fees
● Marketing goal acquisition cost = cost to create an average piece of marketing content ÷ # of desired conversions
As you run your marketing campaigns, track the number of newly acquired customers you’re accumulating as well as the cost per acquisition. This will help you determine how well your campaigns are performing, which will give you insights about campaign content aspects you may want to tweak to improve performance.
Hopefully this article has given you a strong foundational understanding of how to plan a marketing budget that will work for your business goals.
Just remember, you don’t have to launch a digital marketing strategy all on your own.
You can always hire FTx 360 to develop an appropriate marketing budget based on your unique brand and manage every aspect of your digital marketing campaigns for you. Our full suite of marketing solutions includes all of the creative services you will need to execute effective digital marketing campaigns that drive website traffic, increase revenue, and expand your brand’s digital footprint online.