The Big Guide for Small Businesses

As a business owner, you may not enjoy having a large marketing budget. However, the income it can bring in can make it worth your while. You may have noticed that digital advertising is the fastest growing media market. In fact, it is estimated to have an annual revenue of $93.75 billion in the US alone.

Because every business varies in terms of location, products, target market, and industry -then your marketing budget will vary too. There is no one-size-fits-all answer when it comes to what percentage of your income to spend on online ads. You can find a lot of suggested percentage budgets online, but the best way to figure out what works for you is to experiment and see what gets results.

We’ll guide you through the complicated steps of budgeting.

This article covers not only ad/media spending but also the resources required to plan and implement a marketing campaign.

Deciding factors for budget planning

• Previous results

One of the benefits of digital marketing campaigns is that you can track data such as views, clicks, and ROI (Return On Investment).

If you have run similar campaigns during previous years, the previous results are the best starting point for new campaign planning. You can find out how effective each part of the campaign was after finishing it.

Email marketing has a higher ROI than banner ads, so you should invest more in email marketing.

It’s important to calculate your ROI when planning a campaign, as the investment is usually much larger than the media/production budget. A lot of time and resources go into planning, testing, and failing before finally proceeding with the final campaign.

• Goals and KPIs

Before planning a campaign, you should have some goals in mind, such as raising awareness or increasing sales. Be as specific as possible so you can tell if the campaign was successful in achieving your goals.

Use key performance indicators to ensure your results are measurable. Rather than having generic goals, you can focus on raising awareness levels among, for example, 800,000 people, and increasing sales by 30%.

If you want to be successful, you need to plan your campaigns thoroughly and set specific goals. This way, you will know how much money you need to spend on advertising.

You can use tools like Facebook Ad Manager or Google Ads to get full analytics for your campaigns and also see estimated results before you start them.

So you can enter your goals into Facebook Ad Manager, Google Keyword Planner, and other media platforms that you plan to use for your ads. and most of these platforms will give you valuable forecasts for cost per click (CPC), per conversion, or other goals. These forecasts will change over time (12 months is a significant period of time for digital media), but you will have a great perspective and starting point.

• Your industry

The industry you work in can have a big impact on things like your target audience, who your competitors are, and what your goals are.

What is your focus–a restaurant or a WordPress plugin? They are vastly different. If you are running a restaurant, your target market is limited to those who live in or visit your town. A plugin, however, can have customers from anywhere.

If you’re working in a large company, you’ll need to take a different approach than if you’re working in a smaller one.

You have to follow the entire process of conversion and invest in additional analytical software and manual work when you offer online shopping. Although the return on investment is high, it may be costly. For entirely offline companies, like small local shops, you just need to evoke customers’ interest, so you only pay for impressions and clicks.

• Target region and demographic

Most online advertising platforms, such as Google and Facebook, set prices through a bidding system. This means that your budget will depend on the number of competitors who are also bidding for the same ad placement or targeting the same demographics. For example, if you are a photographer in Los Angeles, a printing company that offers custom photo books in the same area is likely to be a competitor, because you are targeting the same audience. The competition can multiply the prices significantly. So, it is important to research the competitor market well before going online.

Optimizing the budget

You can use data and analytics to help you create a budget that meets your needs.

You can aim to optimize the following:

• Payback: You can determine the overall communication effectiveness or payback, often referred to as ROI. It’s important to understand how the campaign is performing for you. If you set out those key KPIs at the outset of the process, you can then benchmark and measure the overall communication perspective.
• Comparative campaign effects: This is trying to benchmark your campaign versus other ones that have either been done by yourself, or perhaps the results of competitor campaigns or related campaigns. This gives you a sense of benchmarking.
• Efficiency: Optimizing efficiency enables you to determine how best to, or how cost effectively, you can do a certain key activity. This can involve frugal innovation and agile movement, where you aim to do things in a short sharp fire way which enables you to gain maximum efficiencies across the marketing campaign.
• Cross-brand effects: How can you optimize the partnership approaches that you may have with different brands and gain synergies from those different brands? Being able to partner with different brands are a great way to be able to gain incremental value and use their media space as a means to create greater efficiencies across the entire network.

Budget for digital integration

When it comes to budgeting for digital integration, you need to consider the following:

• Exploit existing resources: Ensure you have a clear understanding of exactly what resources you have available to you at this point in time. Make sure you make full use of them. A nice framework to use in this area to identify what existing resources that you have is think about owned media, bought media, and earned media. You’ll be able to quite rapidly identify those various channels that you have under each of those sections and then make sure you are utilizing them.
• Maximize your ROI from existing investments: Use your digital auditing process to identify exactly what investments you’ve currently made. Usually you have a variety of digital tools that are already in the marketplace. Social pages, bought or earned media assets, your website, and so on can all be used to maximum effect.
• Experiment with creative and media: Using A/B testing is a great methodology. You put a variety of different creatives into the marketplace using what’s called a champion challenger approach. You can compare the performance of those different creatives which then enables you to determine which one is the one which is the champion.
• Trial paid-for solutions: One of the major advantages of digital in today’s landscape is the freemium model. The freemium model allows you to trial a variety of products and services, largely either free or in a very cost-effective way. And then in essence, when you know something is working and when you are looking to ramp up, that’s when the model starts to become more of a paid for type of structure. For example, in the email marketing type of world using MailChimp at the outset of a campaign enables you to deliver campaigns literally free of cost to begin with, and then as your volumes increase you need to pay more for those services or upgrade to someone like ActiveCampaign.
• Invest: Continually invest in a variety of different assets and techniques. It’s important that you don’t see your digital integration as a static type of approach, but actually a way more comprehensive one where you’re constantly investing in new assets.

Creative media ratio

The amount of money you spend on creative content versus advertising and promotion is important to consider when planning your marketing budget. This is referred to as the “creative media ratio.” Too little investment in either content or promotion can result in suboptimal results.

If you want your creative to reach as many people as possible, you need to make sure you’re investing enough in it. One way to gauge whether you’re spending enough is to compare the amount you’re spending on the creative itself to the amount you’re spending on the media to promote it. There’s no perfect ratio, but traditionally marketing functions have gone for an 80:20 split between creative and media. However, given the current digital disruption, that ratio may be a bit off in today’s climate.

Creative budget considerations

The time needed to develop a quality creative asset is also significant. A great deal of time and effort has to be allocated to the creative aspects in order to create a successful outcome. Do not underestimate the amount of time, effort, and money that goes into developing creative assets, copywriters, art directors, creative personnel, and so on. And these are often expensive individuals, given the talent that they bring. The time needed to develop a quality creative asset is also significant. A great deal of time and effort has to be allocated to the creative aspects in order to create a successful outcome.

If you spend too much money on advertising, it could hurt your company’s performance. Try to keep the amount you spend on advertising in proportion to other expenses.

Social media monitoring

You will need to consider how you want to develop your in-house social media monitoring. It is crucial that you allow a wide variety of people within the organization to have access to social media monitoring. With this, you can frequently obtain detailed information about your customers, allowing you to quickly adapt your approach.

Bear in mind the following when thinking about your in-house social media monitoring approach:

• Gain invaluable feedback: It gives you an invaluable feedback loop to your customers. You can ask specific questions and they give you answers in real-time.
• Establish and refine your tone: You can start to think about your overall communications approach based on pure customer insight.
• Negate harmful social buzz: You can also use it as a way to proactively negate against any other negative social buzz that’s kind of floating around in the ether.
• Monitor competitors: Monitor what’s going on that could harm your brand and then negate against it. You may also want to monitor your competitors, see what they’re saying, what they’re talking about, and then respond to them in a robust way.
• Monitor hashtags: Hashtags are essentially cues with which you can categorize different key things that people are talking about. By monitoring hashtags, you can get key themes of things that people are saying about you.
• Understand location-based social listening: You can gain a robust understanding of when someone is talking about you and then be able to get into those areas.
• Improve content strategy: By having an in-house approach and listening, you can then gain new ideas about what customers want to hear about and then basically build a robust content strategy on the back of that.

How do you calculate your digital marketing budget?

To begin, research how much of their gross revenue companies similar to yours allocate to digital marketing. As a general guideline, new companies should budget 12-20% of their gross revenue, while established companies should budget 6-12%.

On search engine marketing? On content marketing? After you have decided on a marketing strategy, you need to figure out the costs of each subsection. This includes inbound marketing, outbound marketing, search engine marketing, and content marketing.

It’s important to keep a close eye on your return on investment (ROI). This will help you understand which activities are leading to more conversions, and why. It’s important to work closely with your team to figure out all the possible reasons something is or isn’t working. Be sure to take your competitor’s digital marketing strategies into account, and incorporate any ideas you like. Make adjustments to your next year’s marketing budget based on your analysis of the previous year’s budget, as well as any changes in goals or the market.

There are many software programs that can help you budget for digital marketing. A simple Google search for “digital marketing budget calculator” will provide you with several helpful options.

Conclusion

We are leaving the pieces of the puzzle for you to pick up and connect.

You don’t need to spend a lot of money on marketing when you first start your business. You can do it yourself or hire a team. If you can afford it, we recommend either hiring a team or outsourcing to a specialist marketing agency (like us for example :)). You will need to spend some money on software, but you can use free versions of analytics and social media management tools. The media budget is entirely up to you! Just spare some 5% of your revenue, do a couple of tests and see how fast you get your investment back.

Related posts:

Digital Marketing on a Budget: 20 Frugal Strategies to Maximize ROI | Loomly Blog 6 Easy Steps to Allocate A Digital Marketing Budget for Your Business – eMarket Experts How to Develop an Effective Marketing Budget 11 Deadly Business Mistakes When Using Digital Marketing Campaigns