This guide will take you through all the steps for creating and managing a digital marketing budget – from understanding your goals to researching current trends, to developing campaigns that will reach your target audience.
How To Set Your Budget For Digital Marketing
To set a digital marketing budget for your company, follow these steps:
1. Map Out Your Sales Funnel
The first step in calculating your digital marketing budget is to map out your sales funnel. Before you get into the nitty gritty details of budgeting, take a step back and look at the big picture. What are your most important customer touch points? How do customers find you? What do they need to know about you before they will convert?
By mapping out your sales funnel, you’ll get a better understanding of where and how to spend your money in order to achieve the best return on investment (ROI/ROAS).
2. Make A Detailed List Of Your Costs
Next, map out your operational costs. These are things that can’t be taken away from your budget without hurting your business. It includes things like web hosting, subscriptions to SaaS products, taxes, fees, etc.
For your marketing team to know how much they have to work with, they need to have a thorough understanding of your total operational costs.
3. Determine Your Overall Marketing Goals
In order to properly allocate your digital marketing budget, you need to have a firm grasp on your overall marketing goals. All digital marketing efforts need to be properly aligned with your overall goals. If they’re not, then you’re throwing money away.
What are your overall marketing goals? Are you trying to increase sales? Generate more leads? By how much or how many? With what timeline? Be specific when setting your goals. Don’t settle for vague aspirations, such as “make more revenue”. If you’re not specific when setting your goals, you won’t know if you’re meeting them.
Having goals in place helps you know where you need to allocate different portions of your budget. They give you clarity on where and how you should spend your money. For example, if you want to increase website traffic, then your budget should be focused on activities that will help drive people to your website, such as SEO (Search Engine Optimisation), Google Ads, or content marketing.
Use the SMART framework when setting your goals. SMART stands for:
Specific – Your goals need to be concrete, such as “increase web traffic by 20% within 3 months”.
Measurable – You need to know if you’re achieving your goals. Determine concrete metrics and KPIs by which you can measure your progress. If you’re goal is to increase web traffic, a primary metric would be the number of visitors to specific pages.
Achievable – Set realistic goals for yourself. Don’t set a goal that is too lofty or unobtainable. For example, if you have a small website, don’t set a goal of increasing web traffic by 200% in one month.
Relevant – Your goals should be relevant to your overall business objectives. It doesn’t make sense to focus on growing social media followers if your primary goal is to increase sales.
Time Bound – Set a timeline for yourself. You need to know when you want to achieve your goal by in order to properly allocate your budget.
Once you have set your goals, you can use this information when allocating different portions of your budget.
4. Select Your Marketing Channels
There are dozens of digital marketing channels available, but not all of them are right for your business. You don’t need to be active on every channel or in tune with every hot marketing tactic. Does your business really need to be on TikTok? Maybe, but it shouldn’t be because TikTok is what’s hot and new.
Ask yourself the following questions:
- What channels can you thrive in?
- What channels allow you to communicate your values?
- What channels most closely align with your marketing goals?
- What are the costs associated with each channel?
- What resources are required for each channel?
By asking these questions, you can narrow down your marketing channels to the ones that make the most sense for your business. This will help you better allocate your marketing spend within your budget.
Channels to consider include:
- Social media
- Podcasts
- YouTube (longform video)
- Your blog.
5. Calculate the Cost of Marketing Activities
Once you’ve determined the channels you want to use, you need to calculate the cost of your marketing activities within those channels.
If your goal is to increase organic search traffic, how much will that cost, both in people-hours and financially? Don’t forget to include all related costs, like keyword research tools, hiring freelancers or consultants, the hours required to create optimised content, etc.
To make sure you don’t go over budget, factor in extra costs for unexpected expenses. That way, you won’t be caught off guard if something comes up later on down the line.
You also need to consider how much time each activity will require. Are you doing it yourself or do you need to hire someone? How much time do you need to dedicate each week or month? These are important questions to ask when budgeting for digital marketing.
6. Scope Out the Competition
Analysing the competition can give you a sense of how you may want to allocate your marketing dollars and hours.
Let the following questions guide your analysis:
- How are your competitors spending their marketing dollars?
- What marketing strategies are they spending money on?
- How are those strategies helping them grow their brand?
- What channels are your competitors using?
- Do you have the resources to compete with them in those channels or should you choose other channels?
By understanding how your competition is allocating their budget, you can make more informed decisions on where to place your own funds.
7. Create Your Marketing Plan
It’s time to finally create your marketing plan.You’ve done all the research and planning. You’ve calculated your costs and analysed the competition. Now it’s time to create your marketing plan.
Your marketing plan needs to take into account a number of things.
First and foremost, what are your overall marketing goals? Everything you do needs to be driven by your marketing goals. Don’t pursue vanity metrics. Only pursue the things that will help you achieve your goals.
If your goal is to grow your revenue, don’t focus on how many shares a certain blog post got. Every digital marketing activity and metric must be tied directly to your overall marketing goals.
Second, what marketing channels are you going to focus on? How will those marketing channels help you achieve your goals? Again, you don’t need to be active in the newest, sexiest marketing channels.
Example: email marketing may be 25+ years old, and yet it is still a highly effective marketing channel. It converts 3x as well as social media marketing! The takeaway is to choose channels that will best allow you to achieve your goals; not what’s trending.
- What resources will you need to achieve your goals?
- Do you have the people you need?
- Are there any tools you need to purchase or subscribe to?
- What is your overall budget?
Do you have the people you need?
Are there any tools you need to purchase or subscribe to?
What is your overall budget?
All of these questions will help you create an effective plan for your digital marketing efforts.
8. Estimate Your Budget
Once you’ve fleshed out your marketing plan, you need to thoroughly break down every activity and estimate the costs. Estimate the financial costs, as well as the people-hours required to complete each activity. Add up all of these costs and you’ll have a more accurate idea of what your overall budget should look like.
As we mentioned, leave room for unexpected expenses, such as additional personnel or resources that may be needed later on down the line.
Determine what is required to get a reasonable ROI and then an exceptional ROI. Estimate as close to the dollar amount as you can for every step of the plan and finalise your budget.
9. Measure Your Results
Finally, you need to measure your results. You need to look at what you’re spending vs the ROI. Ask yourself:
- Am I getting a good ROI for each marketing activity?
- Were there any places where my calculations were off?
- Do I need to make any adjustments to my spending?
Use your results to help you plan next year’s budget and to make optimisations to your current budget. For example, you may find after several months that a particular activity has a very low ROI compared to what you thought it would be. In this case, it might be worth cutting your spending for that activity and reallocating the funds to something with a higher ROI.
By measuring the results of each activity, you can more accurately plan for next year and ensure that you get the most out of every marketing dollar.
In closing
By taking the time to research your target audience, create a detailed plan, and measure your results, you can make the most of your marketing budget.
Digital marketing can be a complex and expensive endeavour.
By taking the time to research your target audience, create a detailed plan, and measure your results, you can make the most of your marketing budget.
By focusing on channels that produce high ROIs and being mindful of expenses, you can maximise your digital marketing efforts while keeping costs under control.
Want to accelerate your marketing results? Click the image below to schedule a free strategy session with Megaphone’s marketing experts.
