Are you struggling to decide the right budget for your digital marketing spend? Well, you aren’t alone! With a myriad of tools, platforms, and tactics, budgeting can often be quite confusing for businesses. While many associate it with numbers, smart budgeting goes way beyond that and focuses on performance and goals.
Whether you are a startup or a well-established business, having a well-designed budget for digital marketing is crucial. This blog will take you through the best framework for optimum outcomes.
Contents
Why Budgeting for Digital Marketing Matters?
Still, wondering whether a digital marketing budget is actually required? Here’s why you need it!
- Make strategic decisions relating to fund allocation
- Enhance predictability in business operations
- Avoid the risk of spending more on under-performing channels
- Ensure that your digital marketing efforts and business goals are in perfect alignment
- Optimize strategies for higher ROI.
How to Budget Your Digital Marketing Spend?
Ready to get started with smart budgeting? Here’s a proven framework to budget your digital marketing spend!
Step 1: Define Your Goals
Before you get started with the actual budget, knowing the ultimate goals of your digital marketing campaigns is vital. Pause a minute and think about what you actually intend to achieve. The goals can range from increasing brand awareness online to driving quality, relevant traffic, and boosting conversions.
A clarity of your goals can make budget allocation a hassle-free affair. For instance, if you aim for more website traffic, investing in content marketing and Google Ads can help. However, when brand awareness is your top priority, use more budget for social media ads.
Step 2: Know Your Marketing Budget
Now that you have clarity of your digital marketing goals, what’s next? Getting an idea of the total budget available for digital marketing matters. In general, businesses allocate nearly 7 to 12% of their revenue to marketing. From that, about 50% or even more goes into digital marketing. The core aim is to stand out in the fiercely competitive online landscape.
When it comes to budgeting for digital marketing spend, consider these points:
- If you have just entered the online market, more investment is required.
- For businesses that have already established their position, lower investment is essential.
- In case you operate in a highly competitive sector, your digital marketing efforts will demand higher investments.
Step 3: Break Down the Budget By Channel
If budget allocation for digital marketing seems to be tough, an easier approach is to follow a channel-by-channel breakdown. You just need to decide the channels you are willing to invest in and accordingly decide the percentage of the budget to be allocated. However, be sure to leave a 5-10% buffer to address the unexpected expenses. Here’s an example of the channel-by-channel breakdown!
| Channel | % of Digital Budget | Purpose |
| SEO (Search Engine Optimization) | 20–30% | Long-term traffic + visibility |
| Google Ads (PPC) | 25–35% | Immediate leads or sales |
| Social Media Marketing | 15–25% | Awareness, engagement, re-marketing |
| Email Marketing | 5–10% | Nurturing and conversions |
| Website/Content | 10–15% | UX, landing pages, blogs |
| Tools/Analytics | 5–10% | CRM, automation, reporting |
Step 4: Focus on the Cost Per Lead/ Acquisition Cost
Want to ensure accurate budgeting? Decide the number of leads your business is planning to acquire every month. Moreover, you must also factor in the average cost per lead or acquisition cost you are willing to spend. All these factors can make it easier to budget your digital marketing spend and ensure better accuracy. Keep a tab on this cost every month and make the necessary changes to the budget based on performance.
Step 5: Pick the Right Tools
Budgeting is indeed an ongoing process. So, having access to the best tool for different purposes is essential. Here is a list of tools you can leverage!
- Google Looker Studio for visual reporting
- Google Analytics for ROI tracking
- Microsoft Excel and Trello for tracking and planning spend
- CRM systems for analyzing leads and revenues
Step 6: Avoid the Common Mistakes
When budgeting for digital marketing, businesses often end up making several mistakes. Be sure to avoid:
- Being shortsighted and overlooking long-term ROI
- Not testing on a regular basis
- Investing in multiple channels without evaluating returns
- Not having clarity on what actually converts.
A Proven Budgeting Framework for Digital Marketing
Here’s a quick overview of the proven framework:
- Establish clear, concrete goals
- Gain clarity on your marketing budget
- Break down the budget by channels
- Estimate the cost per lead or acquisition cost
- Select appropriate tools
- Avoid mistakes
Wrapping Up
A smart budget is undoubtedly at the core of your digital marketing success. So, instead of asking “How much to spend on digital marketing?”, start asking “Where to invest?”
Need assistance with developing your custom digital marketing strategy? Trust the digital marketing experts of Pentagon! From planning to execution, the professionals can assist in every step.
FAQs
How much can small businesses invest in digital marketing?
As a matter of fact, most businesses spend 7 to 12% of their revenue. From that, 50 to 70% goes for digital marketing.
What is the most budget-friendly digital marketing channel?
SEO proves to be the most cost-effective in the long run.
Is digital marketing possible with a limited budget?
Absolutely! You can leverage channels like Google Ads, retargeting, and SEO for better visibility.
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