One of the toughest things for a lot of businesses to do isn’t deciding they should engage in a digital marketing strategy, and it might not even be the creative aspect of digital marketing and advertising. Instead, what’s often most challenging is determining and maintaining the right budget.
There are so many places you can spend money when it comes to digital marketing, ranging from social media advertising to buying display ads on third-party websites. You can spend money on content, you can work on SEO, and you can purchase Google ads. These are just a few of the many options available, so how do you know what to spend and where to spend it?
Percentage of Revenue
Most marketing and advertising professionals feel the best thing to do before spending on advertising or marketing is to decide on a percentage of overall revenue that will be spent.
This gives you a sense of consistency when you’re planning future spending and budgets. Most companies spend around 2.5% of their annual revenue in online marketing, according to Gartner in 2014. While that was the reported estimated budget in 2014, it’s also important to note that survey and subsequent research has shown an increase by most businesses in the past few years.
If you’re just starting out with buying advertising and digital marketing, start with a small percentage. You can always increase it.
Do Your Research and Testing
Your first initial months of your budget should be geared toward research. Plan on having your money during these months go toward experimenting with different options and potentially hiring professionals who can help you develop a well-honed strategy. It will be worth it to spend money here initially and make sure you’re then going to be putting your future budget in the right places.
During this time your first campaigns will be all about generating data and discovering the platforms and mediums that work well for you.
Once you’ve had some initial campaigns in place, you’ll know that you’re developing a budget based on ROI and measurable data.
Cost Per Lead
Once you’ve moved past the point of research and testing, you’ll be ready to set your long-term advertising and marketing budget. At this stage, the objective is to have a cost per lead that is well below the average revenue you’re gaining from those leads.
For example, if you’re bidding on ads, you want to make sure that you’re doing so in a way that maximizes your spending and ROI.
You should also be aware as you’re working on your long-term budget that most campaigns aren’t going to perform at their top potential right away. Rather than completely taking a campaign that is underperforming out of the mix, you might want to look at the specific areas it’s failing.
To conclude, while your budget as a percentage of revenue may remain relatively steady for months or even longer, that doesn’t mean that allocation has to remain the same. Budgeting for digital advertising and marketing is fluid, and you are likely going to constantly be making tweaks and changes to ensure you’re maximizing your money.