Understanding how to allocate your marketing budget is almost as important as understanding what actually goes into your marketing budget. And that’s because marketing budget allocation gives you more control over the spending decisions you make. Marketing is expensive and if you’re running a small business, you probably don’t have a huge marketing budget to work with. But there are still plenty of options available to you if you use digital marketing budget allocation as part of your strategy.
Digital marketing budget spending depends on a variety of factors
Digital marketing is more cost-effective than traditional marketing. That’s why it’s important to have a digital marketing budget allocation.
The amount you spend on digital marketing depends on a variety of factors, such as your industry, niche and target audience. These factors determine how much competition you’ll face, which can affect how much you will need to invest in order to stand out from the crowd.
If you’re starting a small business with a limited budget, here’s what you’ll need to know about allocating funds for your digital marketing efforts.
Industry and Niche
The first factor that should be considered when determining your digital marketing budget allocation is your industry and niche. It might seem counterintuitive, but the most competitive industries tend to offer higher returns on investment (ROI) because they are also the most lucrative.
If you run a small business that sells athletic apparel, such as running shoes or workout clothes, you shouldn’t be afraid of allocating a larger portion of your budget toward digital marketing. Your competitors may be spending big bucks on advertising and promotion, but the potential rewards are greater in this industry than in more niche areas where demand is lower overall.
Size of your company has an impact on your marketing budget allocation
How much should you be spending on marketing? This is one of the most important questions in business, and it’s one that is not always easy to answer. It’s especially challenging for small businesses with limited resources. While many small businesses do not have a separate marketing department, they still need to dedicate a dedicated budget to marketing. However, this can be hard to justify when there are other more pressing needs.
But no matter how small your business is, you need to invest in marketing. Even if you don’t have a large budget for marketing, you can still spread your brand awareness and increase sales with the right strategies.
So what’s the magic number of how much you should spend on marketing? Unfortunately, there’s no easy answer to this question. Marketing budgets vary greatly and depend on many factors, including:
- The size of your company
- Your industry
- The region where you operate
The size of your company also has an impact on your marketing budget allocation. If you’re just starting out and don’t yet have a customer base, you may want to commit more money to build brand awareness and drive website traffic so that people become familiar with your business.
Ideal percentage for digital marketing spend
Digital marketing budgeting is not easy, especially for small business owners. You don’t have the resources (or the expertise) of a large brand, and you need to spend your money wisely.
Allocating a healthy portion of your total marketing budget to digital marketing channels is essential.
The downside: There’s no one-size-fits-all approach that works for everyone. It’s hard to say what “good” or “bad” digital marketing budgets look like. It all depends on your goals, industry, customer base and the size of your business.
As a general rule, though, you should allocate at least 10% of your budget to digital marketing. Small businesses should start with 10%, but larger companies have more leeway — they can start with 5% and increase as they see results from their campaigns.
The average digital marketing budget for businesses in various industries is as follows:
- Retail and eCommerce: 12%
- B2B: 9%
- Media and entertainment: 11%
- Professional services: 6%
- Travel and hospitality: 8%
Research competitors and conduct a cost-benefit analysis
When it comes to digital marketing budget allocation, there are a few common mistakes entrepreneurs make when creating their digital marketing plan, especially when they’re short on cash.
The first mistake is not doing any research on competitors. When it comes to your digital marketing budget allocation, you should know how much money your competitors are spending on their digital marketing efforts. Knowing this will help you figure out if you have enough money to compete with them.
The second most common mistake people make is not doing a cost-benefit analysis. You need to see if the return on investment of your digital marketing is worth the amount of money you’re spending. If not, then you need to change your strategy or lower the amount of money you’re spending.
The third mistake is not doing any research on what kind of content will be most effective for your business’s target market. The best way to figure out which type of content will perform best with your target audience is by researching competitors and analyzing what kind of content they’re using in their digital marketing efforts.
Hire a team to perform certain tasks or outsource third-party agencies
Allocating your digital marketing budget can be difficult if you don’t know what to look for. There are tons of options out there, and it’s hard to figure out where your money will be best spent.
The first thing to consider when allocating a digital marketing budget is who will do the work. You may choose to hire a team to perform certain tasks or outsource work to third-party agencies. The cost of hiring in-house employees can vary significantly depending on their expertise and the size of your company. For example, the average salary of a content writer is around $45,000 per year, while an SEO specialist would make closer to $50,000 per year (according to Glassdoor).
Hiring an agency is typically more expensive than hiring one employee, but it has its own benefits as well. An agency will have access to multiple types of talent, so you won’t have to worry about finding someone with specific skills or expertise in a particular area; they’ll already have that person on staff! Agencies typically charge by the hour for their services which means that you won’t incur additional costs related to overhead such as training new employees or providing office space for them – meaning lower overall costs.
Allocate funds based on specific goals such as increasing sales
Having a digital marketing budget doesn’t have to be complicated. As an entrepreneur, it can be as simple as allocating a percentage of your revenue to marketing, or making sure you’re working with a company that offers flexible packages and payment plans.
If you still feel the need for more guidance on setting the proper budget, here are some things to keep in mind:
1. Set goals
Understanding your goals and how you’ll measure them is key to setting a budget, and will help you decide whether to hire an agency or do it yourself. You can allocate funds based on specific goals such as increasing sales or attracting more traffic.
2. Research keywords
Knowing how much it costs to rank for specific keywords will help you figure out your overall digital marketing budget. For example, if it takes $3,000 in campaign spend to appear on page one of Google for a keyword that drives $300 of profit per sale, that’s a no-brainer investment decision.
3. Test ads and landing pages
You don’t have to spend thousands to run advertisements on Facebook or Google right off the bat — in fact, you shouldn’t if this is your first-time running ads online. Start with smaller budgets and test multiple ad variations.
The digital marketing world, like so many other industries, can become easily overwhelming. The sheer number of options, the uncertainty in how to allocate your newfound budget—these are but a few of the factors that can leave you feeling like you’re lost at sea. But it doesn’t have to be this way. You don’t have to be the victim of circumstance. In fact, by taking the time to prioritize your marketing spending and understanding each channel’s ROI, you give yourself complete control over how your budget is allocated and how your money is spent.