Are you creating your new year marketing strategy and are wondering how much of your budget you should spend on digital marketing this year? When it comes to creating an effective digital marketing budget, every business is different.
However, we’re here to help with a guide that can help you figure out how much you need to spend on digital marketing this year. Align the points in this guide to your own unique business to figure out the best budget option for you.
Consider Your Revenue Goals
The goal of digital marketing is to help your company meet its revenue goals. To figure out how much you should spend on digital marketing, you will want to think about how much it will cost to reach your goal. To do so, work backward by looking at your past year’s digital marketing efforts and see how much revenue your ad spend brought in.
This can give you a good idea of how much you will have to spend to meet the next year’s revenue goal. You may also consider starting from the top and addressing your company’s overall business goals. Then, look at how you are marketing by examining each department and marketing method.
This can give you an estimate as to how much revenue each department is expected to deliver. By looking at your entire marketing budget, you can determine what percentage of that budget you can afford to spend on digital marketing based on past revenue performance. If your marketing budget has the funds to sustain long term growth, then great.
However, this may not be the case if you don’t have the marketing dollars to impact you are hoping for. Or maybe it’s your first time using digital marketing to promote your business, so you have no past data to work off of.
If this is the case, examine how much cash flow you have and get an idea of how much money you really have to spend on digital marketing. You want to set a realistic budget that you can manage.
Consider The LTV of Your Customer
Another great method that can help you determine your digital marketing budget this year is to consider the LTV, or lifetime value, of your average customer. This is a prediction of how much a customer will spend with you in their lifetime. To calculate this prediction, look at the average yearly profit that your average customer brings your company.
Multiply that number by the average amount of years that customer is likely to purchase from you. The higher the LTV of your average customer, the more you can spend on acquiring new customers. If you need more marketing dollars, a good practice is to find ways to increase your consumer LTV.
Consider Your Conversion Rates
To see how much you should spend on digital marketing, you should look at last year’s conversion rates. Start by looking at your website and how well you are getting website leads and converting them into customers. Look at your leads as well as how many leads develop into paying customers.
Examine where you are generating these leads from. How well are your digital marketing efforts generating leads to your website? When your digital ads turn to website landings, how well do they turn into purchases?
If your leads and conversion rates are lower than you’d like them to be, try testing your ad layout and buttons, such as your call to action. Also, add some social proof, like testimonials, reviews, and ratings. This will help you figure out how to optimize your ads so that you’re using most of your digital marketing budget.
Consider How You Will Spread Out Your Marketing Dollars
It can be difficult to figure out how to spread out your marketing dollars between on and offline areas and how you will spread them between your different digital marketing channels. To do so, draw up some data to see what efforts are working for your company and which ones aren’t worth investing in. Look at where most of your leads come from and map out the customer journey to understand what marketing methods resonate with your customer.
This will help you measure your marketing efforts. You need to understand how your company best turns a stranger into a customer. Look for areas that have given you a positive return on investment, and allocate more funds to these areas.
To do so, determine your target audience or your ideal buyer persona to figure out what lead types align with your customer and lead to revenue. It would help if you also examined the time it takes to convert a stranger into a customer so that you can understand the importance of every conversion rather than missing a step in your conversion process.
Figuring out every step of your customer’s journey or conversion process will allow you to examine areas crucial to fund this next year.
For the top digital marketing trends in 2021, click the link.
Determine Your Digital Marketing Budget for 2021
If you’re creating your digital marketing plan for 2021 and are trying to figure out where to allocate your marketing dollars, use the steps in this guide to get a better idea. When trying to figure out how much you should spend on digital marketing, you will evaluate the above factors.
For more digital marketing advice, head to the “Tech” section of our site.