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When it comes to setting aside money to spend on digital marketing, businesses stick to the 5% rule. So your digital marketing spend — assuming that marketing = digital marketing, in your case — is 5% of your revenue. That said, most businesses, on average, allot 7-8% of their gross revenue to use for digital marketing.
It’s also not uncommon for new businesses to spend more (up to 20% of their total revenue) when they’re just starting out. Understandably, a good business website, SEO copywriting, social media setups, etc., are some of the essential investments a business needs to make upfront.
As you can tell, getting a ballpark value to put on your digital marketing budget isn’t the difficult part. But how you really use it to formulate your digital marketing is. Let’s go over a few steps to help you do just this.
1. Set your digital marketing goals
- The first thing you need to do to plan your digital marketing budget for 2024 is note your business goals, as your business goals guide your digital marketing budget and spend.
- Let’s say your key business goal for the upcoming year is to increase your revenue. Now, if you add some specificity to it, your goal becomes something like increasing your sales by 10%. Easy, right?
- Another thing: Is increasing sales by 10% achievable? Well, maybe yes, maybe no. Only you can tell.
- When you start listing your business’s marketing and growth goals, you’ll end up with a long list.
2. Pick the channels that are effective at meeting your goals
- Many digital marketing channels work just as well across the entire customer journey. For example, if you have a good business website, everyone — from a new PPC lead that is only learning about your services to a long-time customer who wants to check out the latest offer you’re promoting — will find it helpful
- Yet, some digital marketing channels tie more directly to your goals. For example, if you want to find new customers, the search ads (PPC) channel can place your business before leads that are searching for you. By showing Google Ads, your services/products are instantly visible to people with a high-buying intent.
- Likewise, if you want to boost brand awareness, you can invest in SEO content. By writing blog posts, you’ll eventually reach more people via search engines.
- To increase repeat business, on the other hand, you can try exploring the email channel. Emails are great at keeping existing customers engaged and selling more of your services/products to them.
- You get the drift…
- So go back to your marketing goals and pick the channels to invest in for your 2024’s digital marketing budget. You might discover 3-5 channels that you need to work on.
3. Set up a framework to measure ROI
The final step of setting your digital marketing budget for 2024 is to build a simple framework for measuring the impact of your investments.
Every digital marketing goal translates to a few KPIs. In our example, finding new business translates to the number of new customers. Boosting brand awareness translates to the volume of website traffic. And generating repeat business translates to the repeat purchase ratio metric (also known as the loyal customer rate), (an increasing) customer lifetime value, and the boost in revenue (from direct upsell and cross-sell sales).
Revisit all the digital marketing channels you set and assign relevant KPIs to them. Next, create a simple spreadsheet to track your metrics. Get a head start with this ROI template from HubSpot.
A caveat:
Because of the way digital marketing works, attributing a new customer or a sale or an upgrade to a single channel (or touchpoint) is challenging. So don’t get too caught up with building an attribution model. Keep it simple!
Wrapping it up…
There are many moving parts to a marketing budget, with your goals, channels, and KPIs being the most crucial ones. So get them right first. Also, every business works differently and needs different levels of spending to achieve comparable results. If you’re in a very competitive niche, you’ll naturally need to spend more. Don’t forget to factor in these granular things.
Also, set aside funds to invest in your website in your digital marketing budget for the next year. Why? Because your website is your most central and an always-on business channel. When done right (with the right design and copy), it works 24*7*365 to generate leads for you. Your website is also the first touch your new leads have with your business. Think leads who land on it via your search ads or referrals or other campaigns.
