It’s a question that many businesses are debating. Marketing spend is frequently targeted for cost-cutting; however, what if you wish to see outcomes?
For businesses looking to expand their reach, digital marketing has now become critical. However, this type of marketing encompasses a wide range of activities. For example, some require a budget (such as ad spend), while in-house employees can complete others without additional funds (like posting on social media or starting a blog).
Factors to Consider While Setting a Budget
· Your Time in Business
Since there’s a need to build brand awareness and engagement with their target audiences, emerging businesses particularly need to spend more money on marketing. They have yet to hear of them, so marketing can help them get recognized in their community.
As a result, startups and young businesses under five years old should plan to spend 12 % -20 % of their gross revenue on marketing rather than 7 % -8 %. This higher percentage will allow them to invest in marketing that will attract the attention of their local community and let them start achieving their growth objectives.
· Target Audience
Once you know your target audience and how your company can satisfy their requirements, you can start creating marketing campaigns with messages that will catch their attention and utilizing marketing channels that will catch their attention.
Suppose your intended audience prefers to gather information from videos before making the purchase. In order to reach them, you may decide to invest much more of your marketing money in videos rather than display ads. On the other hand, a demographic that likes to receive email communications may require investment in email marketing campaigns.
· Social Media Preferences
You must determine where your target audiences spend their time on social media and then direct marketing dollars to those platforms. Instead of spreading your marketing money thin by attempting to target each social media channel, focus on Facebook or allocate funds to Instagram.
· Marketing Goals
When determining your digital marketing budget, consider your marketing objectives. Do you want to increase brand recognition? Increase your sales? Address common misconceptions about your company. How about promoting a specific discount? Increase traffic to your website? Should you broaden your contact list?
How Much Should You Spend
Defining a marketing budget can take a lot of work for many businesses. They don’t know what a modest amount is. A percentage of sales is a good starting point. You’ll have a starting point if you can commit to investing some of your profits back into marketing.
In terms of specifics, here’s what we’ve discovered:
· If you can spend 6–9% of your revenue on marketing, you should be able to sustain your current position.
· If you can spend 10-14% of your revenue on marketing, you will be able to strengthen your current market position.
· In terms of dollars, that varies, but we’ve discovered that a minimum of around $3000 monthly will produce long-term growth if wisely invested in marketing.
One other factor to consider is that the sum of funds required to achieve results varies significantly by industry.
For example, if you’re targeting highly competitive keywords, you may need to spend more if multiple competitors are using those keywords. A small local law firm, on the other hand, might get good results by splurging $1000 per month on local keyword searches.
Does a Bigger Budget Always Win?
Small businesses may struggle to compete with larger companies with larger marketing budgets. They appear to be on every platform, and competing may appear to be an impossible task.
But do larger budgets always win? No, if you’ve done your research, identified your target market, and created communication that will appeal to them. It’s more about being wise with your marketing dollars and being very direct instead of taking the “spray” approach many large corporations take.
Smaller businesses can benefit from their size. For instance, they are more agile than large corporations and can quickly adjust their strategy. For example, you may be able to pinpoint customers’ problems more rapidly and tailor an offer to them.
With a consistent strategy, you can figure out ways to be relevant and engaging. Also, keep in mind that people prefer buying from small businesses! There is a growing influx of individuals who prefer to “shop local,” so this could also work in your favour.
Focus on “Blended Lead Cost”
Determining how much to invest in digital ads is stressful for small businesses. The most stressful factor is that online advertisements sometimes appear too expensive to be a feasible option. In reality, you’re probably measuring ad performance too narrowly. Consider how you purchase services for your company. Do you immediately sign up after clicking on a banner? Most likely not. So don’t expect purchasing behaviour to pertain to your own ad campaigns, and don’t base your ROI on such a shaky foundation.
The metric you should pay attention to is your “Blended Lead Cost.”
It’s a mistake to separate your paid and unpaid traffic sources. As you can see, the journey is complicated. A user who discovered you through an advertisement could quickly return and transform after multiple visits, whether direct or organic.
What should your digital marketing budget be in 2023?
Enough to enable you to achieve your objectives. We’ve established that it’s critical to keep marketing going, even if the urge is to cut back on spending. History shows that if you have a decent product or service that customers desire, you will not lose money on strategic marketing. Bigger isn’t always better. You can compete as a small business with a strict budget if you conduct thorough research and planning.