How much of your 2016/2017 marketing budget should be allocated for digital marketing?

Technology report
Twenty years ago a marketing budget had categories for advertising - broken down into print, radio, television, billboards. Line items for PR, promotions, trade shows, and printed materials were also included. In the late 90s and early 2000s, that advertising category started to change as online advertising, search engine optimization and website budgets took on greater importance.

Today’s business marketing budgets need to account for full digital marketing strategy and activities. With that shift comes questions:
  • How do you include digital marketing in your company marketing budget?
  • What percent of your marketing budget is allocated for digital vs traditional advertising?
The short answer to those questions is that you turn your company marketing budget upside-down. In 1996 you might have spent 80% of your advertising budget on traditional advertising with 20% (and that’s being generous) spent on your website and online advertising. Today, many companies are finding themselves flipping that budget and spending 80% of it online and just 20% or less on offline advertising. Why the change? Because smart organizations know that reaching, engaging and converting your prospects online is more cost effective and brings a better ROI than traditional advertising.

Marketing drives revenue

The U.S. Small Business Administration recommends spending 7 to 8 percent of your gross revenue for marketing and advertising if you're doing less than $5 million a year in sales and your net profit margin — after all expenses — is in the 10 percent to 12 percent range. Read the full article.

Let’s start by agreeing that marketing is a worthwhile investment. While actual marketing budgets vary industry by industry, the successful organization is spending approximately 10% of their gross revenue on marketing - on growing their business.

According to a survey by Gartner, the majority of companies are spending between 10 percent and 50 percent of their marketing budget on digital marketing activities, with the average at 25 percent. Learn more.

Looking at those budgeting trends, you can quickly estimate what your organization should be spending on digital marketing - and it’s probably not a small amount. It is clearly worth spending the time upfront to adequately plan your digital marketing strategy and budget.

Building your digital marketing budget 

As our clients have grown more sophisticated, they want to make sure they leverage their
website investment. They know that just building a great website isn’t enough. A website is a powerful marketing tool for an organization—only if it is utilized. How do you build your digital marketing budget?
Building a great website isn’t enough. A website is a powerful marketing tool for an organization—only if it is utilized. Tweet this

Set marketing goals

First start with your overall marketing goals. Do you want to build brand awareness? Do you want to increase your customer base by 5% each month? Do you want to better help customers you already have? The answers to these questions will help you determine where you should focus your marketing efforts. In turn, those efforts will then help you determine how much money you need to allocate.

For example, if one of your goals is to generate more leads for your sales team, and your website is three years old (or older), you need to allocate additional funds to the marketing budget for updating the website. If your website is new, you could use the funds toward inbound marketing campaigns that will generate more qualified traffic to your website.

Analyze past results

Once you have your goals set and a better awareness of what activities will need to be accomplished this year, analyze past results. If you did a keyword advertising campaign last year that had horrible results, don’t throw more money at keyword advertising this year. Instead, review efforts where data shows good results or do some research into options that have been successful in your industry. It might be time to consider increasing your spending on social marketing or email marketing. Digital marketing lets you track so many facets of your activities, use those results in your planning.

Research industry trends

Talk to experts in digital marketing. Review the activities your competitors are doing and see how yours compare. Read up on what’s new and what’s proven effective for others in your industry. While it’s smart to spend marketing dollars in areas with proven success. It’s just as smart to spend some of your budget on new efforts — testing out new opportunities to help you stay ahead of the curve and continue targeting the best ROI.

Digital marketing activities

It would take another article to really dig into the different activities that make up a successful digital marketing budget. In general you should be considering:
  • Website development and design that is interactive, customizable and engaging.
  • Email marketing that is targeted to reach each of your audience segments.
  • Videos that tell the story behind your product or service and engage prospects and customers in a whole new way.
  • Blogging valuable, relevant content that increases organic search engine traffic while also giving your customers a resource to help with their challenges.
  • Inbound marketing campaigns that target and engage prospects while moving them down the sales funnel.
These are just a few suggestions of digital marketing activities to consider. Our recommendation? Start with the strategy and then find the activities that support your goals.

If you’re looking to build an effective digital marketing strategy and budget, look for a trusted digital marketing partner like TBH Creative. We can help you plan your digital marketing initiatives, set a realistic budget to achieve your goals, and execute your digital marketing plan. We stay on top of trends and opportunities so you don’t have to.
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Brad

About the author | Brad Hindman

Brad is the vice-president of TBH Creative and helps architect solutions that help our clients succeed. He also manages operations and IT infrastructure.​ He likes to blog about how business and marketing are tied together.

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