Picture this: You work as a marketing coordinator. Your task is to attract customers to your brand, and the only way to sustain your job is to make your bosses happy.
Your bosses trust you to help them roll in the big bucks. They’ll allocate a small digital marketing budget and expect you to make magic with it.
You Don’t Need an Explosive Digital Marketing Budget
A common misconception making rounds on this hallowed walls, that’s the internet, is that you need an explosive digital marketing budget to make things work for you online– pure myth if you ask.
With proper strategic planning (right from the outset) aimed at targeted and more realistic outcomes, you can still achieve tremendous success even with a limited budget.
Here’s our perspective:
Digital marketing doesn’t necessarily have to be expensive.
The point is to learn how to make the most out of your marketing budget — however small it is.
Learn to plan the channels and resources you’ll use. It doesn’t matter if it’s PPC advertising, SEO, or social media marketing; all it takes to dominate any of these channels is careful planning, strategy, and continuous refinement.
How Much Should You Spend on Digital Marketing?
Digital marketing has been growing over the years, taking over from traditional marketing.
A majority of business owners are already embracing the shift – and if there’s one thing they would all like to know is “how much money should they allocate to digital marketing?”
The United State’s Small Business Administration suggests that you allocate between 7% to 8% of the generated gross revenue to marketing.
You’re to then split the amount into two, dedicating one half to digital marketing specifically.
This is an idea you might want to take into consideration. But how exactly does it work in the real business world?
According to a different study, marketing budgets account for about 10 to 14% of the total budget companies have. This might vary from company to company, depending on the industry and the age of the company. But it’s pretty reasonable.
If your company generated $1000 000 in gross revenue, you’re to dedicate $70 000 to $80 000 to marketing.
That means you’ll have between $35 000 to $40 000 (half your marketing allot) to spend on digital marketing.
That’s one of the formulas you may use to determine your digital marketing spending. That formula just gives a quick and cursory look at digital marketing budgets.
But how will it look like when fleshed out? How exactly should you plan your digital marketing budget?
Read on to find out.
Some Quick Stats on Modern Marketing
- The US Small Business Administration suggests that you allocate between 7 and 8% of your company’s gross revenue to marketing.
- You should reserve 50% of your marketing budget for digital marketing only.
- Video marketing takes the lead, with its usage expected to double from what it was in 2016 come 2021.
- A quarter of your digital marketing budget should go to social media marketing ads.
- Though less rapidly, social media marketing has been steadily growing over the years and is now about to hit 25% of digital marketing spending
- 48% of companies allot between 4% to 5% of the revenue they generate to marketing.
- 50% of companies suggest search-related strategies have the highest returns on investment (ROI) – SEO, Paid search, and content marketing (Hook Agency 2020).
You can use this formula to determine your digital marketing spending. However, to flesh it out, you have to look into the various digital marketing tools, decide which ones to use, and what to allocate to each one of them.
The Latest Development and Changes in Digital Marketing Budgets in 2020
- The Covid-19 pandemic has affected the economic outlook of many customers
- Social unrest has reduced foot traffic for businesses in many of the cities in Singapore
- Long content calendars now appear silly following the mid-year changes in 2020
- The digital marketing allots of marketing budgets have increased from 42% (in 2019) to 45% (2020)
Changes to How People Are Spending on Digital Marketing
The Covid-19 upheaval has brought with it so many changes. Things have shifted, setting marketing on a digital trajectory.
So, what are companies doing differently with their digital marketing budget:
Activating their Customers or Clients
Businesses stopped obsessing over new customers and instead shifted their focus to current customers.
See, no customer is in a position to tell your business story better than an over-the-moon one.
A raving fan will be all over the place, telling your company story through videos, testimonials and events, or with every chance they get.
Activating new customers is a new trend that’s fast picking up steam. And it goes beyond testimonials and videos.
A simple approach is where you create a “network effect” by forming a customer group. Here, customers get to know each other and exchange ideas. It’s more like a mastermind group, great with B2B.
You can scale your business stories by activating your customers and acting as your customers’ connector.
Retargeting, a Bottom of the Funnel Initiative
You don’t just ignore a customer who couldn’t bring him/herself to make up their mind. How about you get them to reconsider their initial stand through retargeting – a strategy that many marketers are now fully embracing.
It’s simple: your job is to identify sales qualified leads and push them to take action by doing the following:
- Create videos for the leads in your sales process
- Educate and challenge the leads in the sales process
- Create case studies and testimonials to direct them on what to do next
- Push your company stories through remarketing on YouTube, Google Ads, and Facebook
- Create an inspirational identity to tighten up your brand message. Create something like this:
“People like us, act like this,” – something people will want to be identified with.
Sales Enabled Efforts
We understand that this article is about marketing. But let’s not forget that the two border each other.
We’re one of the biggest proponents of sales-enabled marketing at Media One –in fact, we encourage you to contact us and get a chance to go through our sales process to get a feel of how it works and maybe pick a nugget or two that you can incorporate into your own sales process.
Here are some of the tools that you can incorporate into your sales-oriented marketing strategies:
- Autoresponders (gravity forms
- Questionnaires (multistep forms in Gravity forms)
- Automatic follow-ups (mail chimp)
- Video intro calls (zoom and Google meet)
- A dashboard with relevant information (salesreach)
- Video integration in your sales-enabled dashboard (salesreach)
- Mobile-friendly multistep proposals (Better Proposals)
Step-by-Step Guide on How to Set a Digital Marketing Budget for Your Company
Step 1: Calculate Your Gross Revenue
Gross revenue is the revenue you receive before you make any deductions, like the cost of goods, rent, taxes, etc.
Estimated revenue, on the other hand, refers to your projected earnings for a given period.
Either of them should work. But if the difference between your gross revenue and the estimated revenue is too big, we suggest you go with the smallest number.
Either way, you need to figure out this number, and where you can, ask your sales team or accountant to help you figure it out.
Step 2: Determine an Ideal Digital Marketing Budget
If your business is relatively new, then perhaps you should consider allocating 12 to 20 percent of your gross or estimated revenue to marketing. Established companies can work with a lower budget than this. But if you’re new, then your priority should be on stretching your reach as far as you possibly can.
You’re working towards creating a name for your brand and products/services. Marketing should be one of your key focuses.
Once your brand becomes established, you can scale down this amount to between 6 and 12% of your gross revenue.
Here’s a Real-World Example of How This Works
Example 1: Company Alphas started ten years ago, and for the past three years, the company generated an average gross revenue of $1000 000 per quarter ($4000000 per year).
The company isn’t exactly new. So, they’re likely to allocate 6 to 12% of their gross revenue to marketing.
That translates to between $60 000 to $120 000 per quarter ($240, 000 to $480, 000 per year).
Example 2: Company Omega started two years ago. It’s a relatively new company that’s still struggling to create a name for itself. Since they started, they have been making about $25000 each quarter ($100 000 per year) in gross revenue.
That means their ideal marketing budget amounts to about $3000 to $5000 each quarter ($12000 to $20000 per year).
This is how you calculate your marketing spending. Now let’s look into how you should be spending these dollars.
Step 3: Identify Your Digital Marketing Objectives
What goals do you have?
Before you plan your budget, you have to take an in-depth look into your business and highlight all the goals you have (for the year and each quarter).
That way, you will know what tactic to prioritise, and where to direct much of your marketing effort.
For example, if you plan to grow your website and generate more business, you should focus more on producing high-quality content and optimising your site for better conversion.
Step 4: Audit Your Past Digital Marketing Results
After listing your goals and objectives, the next thing you want to do is evaluate your past marketing results. What you gather should help you inform your new marketing strategy and budget.
For example, if you plan to generate more business, you want to start by identifying all the tactics you might use to achieve it. You’re to audit your past results. Pick what worked for you, what needs to be improved, and what to discard.
- Which channel generated the most targeted traffic?
- Which ads generated the highest number of leads?
- And so on.
Here are a few of the things you should take into consideration:
Which channels drove the best results? Based on your digital marketing objectives, which channel drove the best results? These are the channels to go heavy on.
Which channels didn’t perform well? There are three ways to go about this.
- The first one is by dropping these channels
- The second one is where you decide to look at what you can improve for better perfomance
- Lastly, you might want to trim down their allot and direct the extra funding on channels that generated the best results.
- Which Tactics Have You Been Using? You want to analyse each of these tactics and find out which ones generated the best ROI.
When performing an audit, you should focus on the goals you have. You have to evaluate your results and find out if they can help you achieve your objectives.
Step 5: Evaluate Your Options
As already mentioned, digital marketing is as convoluted as it comes – with a multitude of strategies and tactics to apply (some of which are must-do’s).
Here’s an interesting list of companies’ top digital marketing priorities in 2020:
Digital Marketing Strategies
Growing SEO/Organic Traffic
Blogging and content creation
Content Distribution and amplification
Interactive content creation
Longform visuals (eBooks and whitepapers)
Visual content creation
Product how-to videos
How to Allocate Your Digital Marketing Budget
You have a marketing budget. But how do you allocate it across channels? And even after you’ve allocated the money, how do you spread it across the channels?
This is not something you rush into. Or use a one-size-fits-all formula to work out the calculations.
No two businesses have the same marketing needs. You need to take an in-depth look into everything right at the beginning and figure out how to invest your marketing money best.
- How would you measure your marketing efforts?
- How would you track where your leads are coming from?
- And how would you be mapping the conversion steps or paths that these leads go through before they become customers or clients?
How Much of Your Marketing Budget Should be Allocated to Digital Marketing?
Digital marketing is only part of marketing.
Its budget is only a portion of your marketing allocation.
Brands whose marketing strategies are centred on the internet will, of course, require a bigger digital marketing budget.
According to Forrester Research, digital marketing accounts for about 45% of the total marketing spending in 2020.
The figure can vary depending on the industry, local market, and growth plans.
A healthy blend of different marketing tools is expected for traditional businesses that rely on both offline and online marketing activities to fill their sales funnel.
And as traditional channels continue to lose ground, the more digital marketing budgets continue to swell.
Digital Marketing Costs That Eat into Your Budget
Here are the digital marketing costs to take into consideration while preparing your budget.
Your Marketing Strategy
You have two options: i.) writing your own digital marketing strategy and ii) outsourcing it to a digital marketing agency.
Usually, it takes between two to three weeks (120 hours) to develop a detailed digital marketing strategy. This time may vary depending on the scale of your digital marketing activities and your experience as the author.
Remember: this is an annual marketing strategy that should be reviewed and updated after every quarter or trimester. The revision should take you about a week (or 40 hours). Altogether, you’d have used 240 hours to develop and refine your digital marketing strategy.
Now, take that and multiply it by a marketer’s hourly rates, and you’d have a rough estimate of how much it will cost you to develop a digital marketing strategy.
Another viable option would be to consider hiring a full-time digital marketing specialist. One should cost you about $87 000 per year, and their job includes full digital marketing planning, strategizing, implementing, and team supervision.
Website or Landing Page Creation
This doesn’t just apply to new businesses. It doesn’t matter if you’re launching a new website or maintaining a website or landing page you already have; you need a budget to create or improve your landing pages or website.
There are tools to help you out with this. So, unless you’re developing one from scratch, you don’t need to hire a web developer or a UX/UI designer.
For a bespoke app or website, you might need to outsource it to an experienced web developer. If the services are too costly in your region, then a cheaper option would be to outsource it to an overseas team. For instance, you may hire a developer from India, the Philippines, and other eastern countries.
They’re much cheaper compared to the developers you find in Singapore.
Content creation is a critical part of your digital marketing strategy. You need someone to help you generate text, images, and videos for your website or blog.
Essentially, you’ll be doing a lot of inbound marketing – which fundamentally translates to a lot of blogging, social media posting, email campaigning, and so forth.
Setting an In-house Team
You don’t need to be reminded that you need a budget for this. If you plan to set up an in-house team for this, you should at least employ one graphic designer and one content writer.
On average, hiring a full-time writer should cost you about $54 000 per year. A graphic designer will also cost you thereabout.
Using a Freelancing Platform
An alternative would be to hire freelance content developers from a job board or freelancing websites such as Upwork or Freelancer. With this option, you should at least be prepared to shell out $50 for a 1000-word article.
But the total amount you spend will vary depending on the number of articles you produce in a week and their respective word count.
By producing one 1000-word article per week, that means you’ll be spending about $26000 per year (for the 52 posts produced in a year).
For projects that you don’t regularly need (such as animation videos), you’re better off outsourcing than setting an in-house team.
Social Media Marketing
As a small business owner, you’re probably unsure of hiring a social media marketer.
The reason could be that you’re convinced you can handle it yourself, or if you can just get the marketing manager to handle it in their spare time – a grave mistake if you ask.
With proper research, planning, and strategizing, social media could turn out to be your most incredible marketing tool.
The problem is that most business owners don’t understand this. They always underestimate its potential to give it their whole.
What to Note about Social Media Marketing?
Social media requires you to stay updated. You’re to follow the activities of your competitors and followers. At the same, keep up with the latest trend. You’re to also keep testing and refining your strategies for better results.
In Singapore, hiring a full-time social media marketer should cost you between $45 000 and $60 000 per year. The social media marketer you hire doesn’t have to come to the office so long as they understand what they’re doing and are fully commited to it.
Budgeting for Digital Marketing Tools and Software
Tracking and Reporting
The first tool you’ll need to track your website performance and its traffic flow is Google Analytics. Fortunately for you, it’s free.
The advertising platform will give you a full analysis of everything you need to know about your paid search campaign, including ad price.
However, if you’re planning to track the user journey as a whole, then perhaps you should consider investing in HubSpot’s professional marketing (which goes for about $9600 per year). This is (by far) the best inbound marketing software you’ll ever come across anywhere and is recommended by industry professionals.
Social Media Management Tools
You have to also invest in a series of social media management tools. This is especially the case if you’re planning to use multiple social media channels. You need a tool for scheduling your posts, monitoring your online activities, cross-posting on different platforms, and getting detailed data.
Essentially, you need a social media management tool such as Buffer or Hootsuite. Luckily most of these tools have free versions that can still get the job done. Meaning, you won’t be spending much here, if any.
Marketing is no longer a one-way conversation. You have to engage your prospects and customers and stay in touch with them until they make up their mind and decide to enter in business with you.
That’s where email marketing comes in.
Email marketing is the channel you use to send newsletters, important updates, and promotions to your customers, via email, of course. It’s safe and less spammy.
MailChimp is the most popular email marketing tool around. Besides helping you set up a fully functional email marketing campaign, the tool is designed to provide you with a detailed report of the user activities relating to your email campaign.
They also have one of the most flexible pricing. For example, if your email campaign only has 10 000 subscribers, then you’ll only be parting away with $75 per month ($900 annually).
If you find this to be too costly, then consider working with a MailChimp alternative. You have so many options that provide the same experience without going heavy on your pockets.
Web Creation or Improvement
You need a website or landing page to run a successful digital marketing campaign.
You need to build one.
It’s easier than you imagine unless you lack the time and patience to set up one.
First, you’ll be required to purchase a domain name (which costs about $9 per year – or even more or less, depending on the ending you choose).
You also want to decide which CMS you’re going to run the website on. We suggest you use WordPress or a paid CMS such as WIX or Squarespace. But for some reason, we still believe WordPress beats any other CMS out there.
Next, purchase some hosting and some plugins, perhaps. The list of expenses can be endless, depending on the functionalities you wish to add to your website. But good hosting should cost you between $30 and $1000 per year depending on the package you choose and the hosting company.
There’s no harm in choosing the smallest package since you’re just beginning.
10Web is one of the highly recommended web hosting companies around. Their hosting plans start at $120 per year.
But there are even cheaper options than that. We are talking of the likes of Namecheap, GoDaddy, and Bluehost.
Outbound marketing is where you get a little more aggressive with your marketing campaigns. Instead of taking a more passive approach, where you make your customers come to you, you make it your mission to reach them with your marketing messages.
Of course, you can’t just rely on one type of marketing. You need to combine them both for better results.
With that out of the way, let’s now break down your media budget.
Social media has one of the most flexible pricing mechanisms. They charge you per click, impressions, or the number of purchases made.
And even with knowing your target and setting your campaign goals, the pricing will vary depending on several factors.
Here’s a real-world example of how this works:
Assuming you’re a photographer who works by himself. Your target is to find 300 clients before the end of the year, each bringing in a $200 check.
The first thing you need to do is experiment with your social media marketing campaign to determine its performance.
Be prepared to do some maths and make necessary adjustments.
Now, let’s say your average spending per click is $1, and that only 1% of those who click through your ads proceed to contact you.
Of those who contact you, 10% end up purchasing your product.
That means you’ll be spending about $10 per purchase $1/0/1 = $10.
Now multiply that by the total number of clients you’re targeting, and it becomes $3000.
That’s the social media budget you’ll need – and which can only be arrived at after experimenting with your campaign and doing some quick math.
We suggest you just allocate 5% of your revenue to social media marketing for a quicker and much-simplified solution.
And while managing your social media, don’t forget about influencers. Spending $500 on a single post can bring back better returns than running a $1500 campaign.
Display Ads (Adroll, GDN, Etc)
Do you prefer running banner ads on Google Display Network (GDN), Adroll, or any other ad network?
You can experiment with the different options to find out which one works best for you.
Google offers some valuable tips on how to plan for your display ads.
If you’re operating a local business, Google’s display offers you a chance to list your ads on local news sites. An alternative would be to contact the sites directly for a price list.
Usually, these publications charge per impression. We recommend you compare it with what Google has to offer to decide what’s best for you.
You’re reminded that Google Display ads tend to be a little bit more expensive than SM ads.
Let’s say you’re spending about $5000 on Social media ads; you’ll have to pay Google ads about $6000 to $8000 to achieve the same results.
The best way to get your site to the first page of search engine results is through SEO. The problem with SEO is that it’s a slow burner. You have to wait for weeks (sometimes months) before results start to show.
So, what do you do?
You opt for their paid alternative, paid searches.
Paid searches are almost instant, only that you have to outbid the rest of the sites to appear at the top.
Remember: this works with almost all search engines – not just Google. For example, you have the option of paying for Bing Ads to appear at the top of the Bing search results.
This is not something you rush into implementing. You have to do a little bit of homework to determine which search engine performs best in your target region and what keywords to rank for.
Google is the leading search engine and most popular of the bunch. But that might not be the case when you’re in Russia or China.
You have to identify the search engine to work with. After that, you want to research the keywords you intend to use and experiment with everything, making necessary adjustments and refinements along the way.