8 Smart Ways to Arrive at your Online Marketing Budget
This week, I’ve come across three businesses who not only had no allocated online marketing budget, but also seemingly had no idea what their potential online marketing budget should be.
Understandably due to the various media and opportunities online marketing offers, many traditional companies are often stupefied at how to begin.
From the age old 5% percentage of revenue for advertising spend to today’s revenue based discussions there are several different opinions when it comes to finding your budget.
Here are a few ways which can help you get closer to your optimal number.
What is your ideal cost per lead?
Many often assume that digital marketing is cheaper than offline advertising and while that was once the case it is no longer true.
If you are new to digital marketing, but have advertised or sold your product offline then you may have a clear picture on how much you have spent per sale. Using that number, you can factor how many lead enquires you need to make a sale and therefore come to your cost per lead value.
While this may not be an accurate value of what your cost per lead should be it does give you a starting point to estimate your marketing budget.
How many sign-ups do you want?
With an established sales team in place, many clients are able to give this number easily enough. Depending on the offering you will need to assume a percentage of “junk leads” which can include invalid entries, and non-buyers like students or researchers.
So if you want 10 leads per month, you’ll need to target at least 25. Then use the dollar value of your sign-up, product or sales conversion to estimate how much you can spend to bring in 25 sign-ups.
What are your competitors spending?
Free competitor analysis websites like spyfu.com and alexa.com can help you find out what your competitors are spending on Adwords PPC campaigns every month. While you may not necessarily want PPC marketing, this value can give you a baseline marketing spend, which you’ll need to compete online.
What are the keywords you’ll be using?
Keyword tools such as Adwords Keyword Planner can also help you estimate the monthly cost to bid or build traffic based on your primary keywords. Look at both the keywords you want, as well as the keywords your competitors bid on in order to a get a reasonable monthly expenditure.
What do trade publications charge?
Look at the industry you are in, and then research into the popular online portals and magazines that offer advertising. Request a few media kits and compare their costs. Check to ensure these publications cover your target audience (many will detail their readership demographics in the media kit) and then evaluate the range of minimal advertising spend to maximum sponsorship. You can also connect with their media buyers who will help you arrive at lead estimates for every tactic they offer based on previous businesses which are similar to yours.
Find an online marketing budget calculator
There are several sites that offer easy ways for you to figure out your potential monthly spend. These calculations are often based on the value per sales as well as knowing your conversion rate. But even if you do not have an idea of these numbers, it is good to try a few of these online marketing budget calculators to get an idea of your potential spend range.
Ask an Expert
While ideally you should know what you want to spend before approaching a Consultant or Digital marketing agency, it can help to talk to a few experts in digital marketing to get an idea of their costs and your potential advertising spend. Their questions (which would ideally cover information on your competitors, conversion rates, current traffic, value per lead, etc.), will also give you an idea of whether they are approaching your expenditure from your business point of view or their own expected advertising results. Caveat: Avoid asking for online marketing budget estimates from agencies that charge by percentage of your expenditure.
Keep in mind there are marketing managers and business owners just like you considering the same question. As a result, every year several publications, research and report what industries are spending on average and which media are working for them. Take note of what these reports foretell and you’re on your way to compiling an effective online marketing budget.
Remember there is no flat, one-size fits all number. Once you have arrived at an idea of what your marketing budget looks like, you’ll need to constantly strategize and optimize to keep that spend effective.