How to allocate budget for Digital Marketing?
How much you should spend in Digital Marketing and how to allocate the right budget we need to implement our Digital Marketing strategy become recurring questions among those who are just starting the Digital Marketing career, those who are looking for information to peek into this world, and even for those who have already traveled some distance and they still doubt the effectiveness of this investment. There are certainly many variables that must be considered to calculate the cost or budget of this type of Marketing.
As a first guideline to define this budget, it must be taken into account at what moment or in what position your company is in relation to your objectives and what efforts you need to make to achieve them.
In other words, your marketing efforts will be determined first and foremost by your marketing goals and environments, and the latter will determine your budget.
Now, the digital marketing ecosystem of a company is defined by its sector or industry, and they are categorized according to their size, among other aspects.
That said, we can deduce that the Digital Marketing budget of one company differs from another, as much as the household budget for each family on the planet.
It is easy to understand, then, that the Digital Marketing budgets of two fast food restaurants will never be the same and much less similar to that of an aviation company, a church or a barbershop.
However, despite the complexity involved in answering such a challenging question, in this post we will try to help unravel the interweaving of the Digital Marketing budget to offer you a general structure that serves as an initial guide regardless of when you are. your venture or company.
What factors should be taken into account when planning a Digital Marketing budget?
The Digital Marketing budget is based on a set of online strategies aligned with the objectives. The scope of these strategies presupposes the definition of the means and resources to be used to provide the best user experience, while we achieve the most suitable infrastructure to make our digital ecosystem more efficient. But, all of this depends on the following differentiating factors:
- Business model
- Marketing objectives
- Industry or sector
- Business Environment
Business model:
There are different business models, comprised of three large groups; traditional, virtual and hybrid business models, among which we can indistinctly find the following:
- Direct Sales of Products and services
- Franchises
- eCommerce
- Dropshipping
- Affiliate Marketing
- Subscriptions / Memberships
Each business model has a different Digital Marketing structure and strategy, so your budget will obviously also differ.
Marketing Objectives:
As we said before, the definition of your objectives will be related to your current status or position, therefore, a simple option would be to carry out a digital audit, which can give you an objective view of the means and resources you will need to plan your digital marketing strategy.
Example of some digital marketing objectives
- Improve visibility on the internet
- Increase the number of visitors to the website
- Grow the Facebook community
- Generate leads – prospects interested in our services or products
- Increase monthly sales
These objectives make no sense if you don’t have how to monitor them, therefore, they have to be measurable, which is the same as being expressed in numbers.
Also ensure that your objectives are achievable in a staggered or time-limited manner. You can consider an annual amount and then assign it to shorter terms in order to measure and correct its effectiveness. This will help you not lose sight of your strategic objective, and keep meeting your short-term or day-to-day plans.
In this sense, our objectives would be something like this:
- Improve internet visibility by 30% compared to the same period of the previous year.
- Increase the number of website visitors by 200%
- Grow the Facebook community by 5000 followers
- Generate leads – prospects interested in my services or products – 1200 annual leads
- Increase annual sales by 150%
Industry or sector:
Digital Marketing strategies vary in relation to industries or sectors. The ideal buyers or consumers of each type of sector are found in different channels. This determines to which channels we are going to direct our efforts and the distribution of funds allocations.
Business Environment:
The business environment is everything that directly or indirectly impacts the performance of a company. For your better understanding, it has been divided into micro-environment and macro-environment, defining as micro-environment the circle closest to the company and macro-environment, the outer circle or at a higher level.
Elements of the Microenvironment: Resources, customers, suppliers, competition, etc.
Elements of the Macroenvironment: Forces of Nature, Technological Development, Government.
Policies, Trends in Socio-cultural Development, among others.
The dynamics of all these elements will directly and indirectly impact your company, hence the part that corresponds to the implementation of your digital Marketing strategy must be considered in the budget.
Alternative Method of Calculating Digital Marketing Budget
Alternatively, you could also Reverse Engineering based on a percentage of sales to model your Digital Marketing budget.
If you already have a history of Investment in digital marketing, everything will be easier because you will be able to determine your cost of acquiring new clients, which is the result of dividing the annual investment you have made by the number of clients obtained in a year. You multiply the cost of acquiring new clients by the amount you propose to achieve for next year and you would already have your first draft budget proposal.
But, if you don’t have a track record and don’t have a lot of experience doing these calculations, then a simple way to conceive your first digital marketing budget would be through reverse engineering. Venture to estimate a% of your sales (preferably between 2-10% of your gross sales) and distribute it for each budget category as show in the editable example template that we leave here for you to download for free, where the already established formulas of preconceived ratios appear . You will only have to add the total preliminary amount of sales that you have proposed to achieve, and it will calculate the amounts for each game.
Budgeting Digital Marketing categories.
- Personnel / Agency Hiring for Project Administration.
- Design / redesign and Web development
- Landing pages
- Web maintenance
- SEO- Web Positioning
- Email Marketing
- Social media
- Local Marketing
- Content marketing (Inbound marketing)
- Technology (Digital tools / Software licenses)
- Advertising and Promotion (Campaigns- SEM-SMM)
- Analytics
- Digital Marketing Contingencies
- Miscellanious
We hope these tips, will serve as a modest solution or starting point to allocatee your Digital Marketing budget. Great budgeting!