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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.
The final step of setting your digital marketing budget for 2022 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.
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!
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.
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