How Much Should I Spend on Digital Marketing?
The Small Business Administration suggests that businesses should be spending between 7% and 8% of total revenue on marketing. This is a good starting point for business marketing budgets. Just look at your company’s revenue and you can make a mathematical decision on how much to spend on marketing and then further divide that down into what to spend on digital marketing specifically. Obviously, the larger your company, the more you spend and the smaller the company the less you spend.
B2B vs. B2C Digital Marketing Spend
The type of business and clients you serve will affect digital marketing spending. B2C vs. B2B businesses will spend different amounts (and in different ways) on digital marketing. Most B2C businesses will need to increase the amount they spend on marketing to around 15% of total revenue. This is because when marketing to the general public budgets are usually higher. When budgeting for B2B digital marketing spends, starting with that recommended 7% to 8% amount may work out okay.
Business Growth Projections Affect Digital Marketing Spend
Oftentimes, the amount a business should allocate to digital marketing budgets will depend on their growth projection. Higher growth projections require a larger budget. Building content and getting in front of more people, in turn, helps to increase the overall digital marketing strategy. It’s hard to be in many places with digital marketing if the budget is too small. More growth means the need for more digital ads in more places, more content, an email strategy, etc. You have to start somewhere but starting with too small of a digital marketing spend means slower progress. Spreading small budgets too thin will have less return and lack enough data to adjust your strategy for success. If you must start with a smaller budget, understand that your growth projections will also not be as large.
Startup Businesses Need Higher Digital Marketing Budgets
Startup companies have higher growth projections and thus require more marketing dollars. Bringing a brand new product, concept, or service to the market, has the challenge of not being known by prospective customers. Because nobody has heard of the startup, the audience has to be built and data is needed to realize its ideal demographics. Thus, more time and more resources must be allocated to explaining why it’s needed. And that content requires that more money be spent on digital marketing. The marketing funnel has to be filled starting heavy at the TOF to show people that they need a product or service. It’s a longer sales cycle than if you’re for example a plumber whose services are more obvious. While plumbers also need TOF marketing, their funnel comes together differently.
Digital Marketing Spend for Different Types of Businesses
Industry alone affects your digital marketing budget. So yes, the amount of money that should be allocated for digital marketing also depends on the type of business you have. Different types of businesses need to evaluate their strengths, weaknesses, advantages, and disadvantages. How those fit within the various platforms will also help set realistic expectations for digital marketing spending. For example, for a lawyer or law firm, the cost per click (CPC) is higher on digital ads than it is for say a veterinarian clinic where the industry is not as aggressive.
Budget Marketing Spend to Reach Your Target Audience
Within the various platforms and types of digital marketing, there are settings and potential restrictions. So consider all of the relevant targeting options when it comes to your digital marketing spend. For example, digital marketing budgets will be different if trying to target a 20-mile radius around your business vs. anywhere in the US. When not properly funded for the area that’s trying to be covered, results will be lacking. So if you don’t have the money to spend, refine your targeting radius accordingly. Keep in mind also that the different platforms have different targeting options. Just among the digital ad platforms, understand that Google ad targeting, Facebook ad targeting, Twitter ad targeting, and LinkedIn ad targeting are all different. There are many strategies to do this and the best approach depends on a variety of factors relative to your specific business.
Talent & Resources Affect Digital Marketing Spend
Businesses take different approaches to who manages their digital marketing depending on size and experience. Some utilize in-house resources, others use a digital marketing agency or a combination of these. What skills do you have with your internal team and what gaps need to be filled? There may be one person in-house who can handle all kinds of marketing but you likely won’t get the full ROI. Take into consideration the depth of knowledge needed across all platforms to see results. The reality is that digital marketing has deep crevices and accurately tracked omnichannel marketing yields better results. Especially for small and medium-sized businesses, working with a marketing agency will give a better ROI. This is because they will have more people with more experience in specific areas of digital marketing. Your digital marketing spending, oftentimes, will boil down to the talent and resources you have to work with.
Standard Pricing for Digital Marketing Services Does Not Exist
There is no standard pricing for digital marketing services because there is no one-size-fits-all marketing strategy. Pricing structures for digital marketing services area all across the board. An agency might be more expensive but not deliver. Or a younger agency might underprice services to gain new business. When you’re considering who to work with, look past the price that’s being put in front of you. Look at referrals, references, and work examples. Know that canned pricing is not customized to your specific needs but rather, is set up so the agency can be more profit-driven. Expensive isn’t always better! So make sure your marketing agency is working for you and not pricing for their own internal strategy. The cost should always be determined by what type of marketing they’re doing. There should always be open communication around digital marketing strategy and spending.
Different Costs for Different Types of Digital Marketing
What an agency is charging for different types of digital marketing should be based on the amount of time, knowledge, and effort that goes into it. Between branding, content writing, managing ads and creative, SEO, organic social media, email marketing, etc the services are not equal. SEO, for example, tends to cost more because it’s complicated and labor-intensive for digital marketers. But for business owners, SEO is more elusive, harder to track, doesn’t give exact results, and can take months to see ROI. On the other hand, running ads is more straightforward, easily tracked, and can be turned on and off.
Have questions about digital marketing spending when it comes to your industry or specific business goals? Schedule a 30-minute strategy call.
