Digital Marketing Budget – Planning and Management Guide [How to + Example]

Let’s face it: a lot of people have problems with setting their advertising budget. Even more, people struggle with their digital marketing budget.

Well, rest assured, I’ve got you covered in this one…

My background in finance taught me small companies often fail because they lack budget planning. Big companies fail because their budget has 0 flexibility.

So What’s the Problem with Digital Marketing Budgets?

First, every company needs a solid marketing plan. A plan that outlines every effort to strategize, develop, and market a product or service. With every new year, there are new customers, new goals, and new opportunities to grow your business.

For example, the pandemic had a great effect on digital marketing. 

It made companies focus on different stages of the marketing funnel, from acquiring new customers to retaining existing ones. Moreover, it made them invest more in social media (47%) website/content marketing (44%), and advertising more on retail apps and websites (43%), according to Criteo. 

Most companies plan their marketing budget in two ways – based on the previous year’s budget and estimations.

This can be devastating. You could be condemning your sales strategy to ruin. Also, you could end up spending too much on wasted efforts just to get things rolling. By having a digital marketing budget, the company can focus on specific goals to make things work long-term.

I’m going to break down the key things you need to do:

• before you start budgeting,
• while you are doing it,
• and after you’ve finished.

Set Your Overall Marketing Strategy

Before you even start thinking about any digital marketing budget, set your master strategy. When it comes to growth, your marketing goals should align with your company’s goals.

If you are not sure what your strategy should be, see how can my team help you.

If you plan to grow your revenues by 30%, but only want to spend 10% more on marketing, the results could disappoint you. Many businesses nowadays still operate only from a master budget, without any plan to accompany their strategy.

Why Is It Wrong to Have a Master Budget?

Most of the time the strategy will be trapped inside a few people’s heads, without the rest of the group knowing any of it. It is very important to develop a written marketing strategy. All your executive, sales, and marketing teams need to combine their efforts and work in the same direction to maximize growth.

The overall marketing strategy should consist of key activities, like classic advertising, public relations, search marketing, video marketing, events, etc. Also nowadays it is crucial to incorporate digital marketing into your strategy.

Online and social marketing should be your primary goals when reaching a wider audience. Nowadays everybody uses the internet. The same process listed above for the overall strategy should be repeated in the subcategories.

Larger firms have the overall marketing budget that is then divided into these subactivities like video marketing or social media marketing. The more details – the more specific your plan is.

How come? Look at the example below:

Therefore, make sure to identify your main marketing channels and align them by relevancy. In most cases, you can divide the channels into five groups. 

PPC

If your goal is to drive traffic to your website/app ASAP, pay-per-click campaigns are the way to go. 

Set up PPC campaigns on one or more different ad platforms and you will have ads across the world in a matter of minutes. Obviously, this will require a big upfront budget. However, if the campaigns are created and optimized properly, they can result in impressive returns. 

Email Marketing

Don’t miss out on this targeted and cost-effective way to get new leads and customers.

Social Media

A great social media strategy can bring you much more than you have invested in it. Here, time and expertise invested are much more important than the budget you invest in it. A lot of companies handle social media management, so it’s your call whether you want to keep it in-house or hand it over to professionals. 

Content Marketing

Content marketing is the best way to reach a lot of people organically. However, you have to maintain your content. Therefore, you will need to invest in producing it and keeping it fresh. 

SEO

If you’re looking for long-term results, invest in search engine optimization. It may take a while for your strategy to work, but once it does, you will get “free traffic” on a daily basis. 

Get and Organize Financial Information

This is another thing you must do before you start planning your digital marketing budget. You absolutely need to get in hold with the company finances. This is crucial because you need to get everything organized. You need the cold, hard numbers.

Now listen to me very carefully: you can’t create a realistic online marketing budget if you have only estimates of numbers in sales etc.

You need to know exactly how much your company makes in a given time period. Of course, the variations will exist and that’s why you always take the minimum amount.

For example, if your company has $10 000 of revenue in one month and $14 000 in another, in your calculations you will take the 10 000 as it is the lower amount. Why? Well, that’s because any amount that is over the minimum cannot be relied upon. It can be there one month and not the other.

After you have those numbers you need to subtract every expense you think of. By that, I mean renting costs, materials, utilities etc.  But this time, exactly the opposite, take the highest amount of expenses you have.

Got it?

Lowest revenue, highest expenses.

The key to creating any type of budget is to closely examine the numbers and figure out the disposable income that you can rely on.

After you have that amount you now need to decide where will that money go. There are other areas of your company and other people counting on the portion of that amount. Those people will plan their own strategies and have their own budgets.

Marketing is only one area you need to incorporate in a budgeting plan and online marketing is an area within an area. Got it?

Depending on your goals and plans your online marketing costs can be even 80% of the overall marketing budget. On the other side, it could be as little as 5%, it all depends on which industry you are targeting, where do your competitors stand and how people react to your marketing channels.

Note: also consider putting some money aside for unexpected costs

Start Setting Your Digital Marketing Budget

Once you have your strategy, goals, and numbers you can start building your budget around it. Marketing budget allocation is next on your list. You need to know exactly what to do with the money you are given.

If you have a small marketing budget you should probably consider print ads and get involved locally. With a medium budget, you can add in online advertising and with a big budget you can add in radio and/or television ads. One thing should be there in all budget sizes and that is social media presence. With social media, you can bring in a wider range of clients that could be miles away from you.

People always ask – how much? How much do they need to spend in order to get things going?

The answer is, as always – it depends.

It depends mainly on the strategy you have outlined before. What do you want your results to be?  Do you want to retain customers and slowly build valuable leads that give big bucks or you want to accelerate the process and apply more resources in complex marketing strategies?

Usually, I tell people not to focus mainly on maintaining their customer base, because for some reason no matter how good you are, some of them will always leave you and you can end up slowly bleeding money.

You should always look for something more, more leads, more customers, more growth.

Note: also if you are considering a new marketing channel, put aside more money for testing. 

In that order to bring you exact estimates I will set an example of a company that uses only social media marketing in order to advertise itself (online marketing budget = 100% overall marketing budget). You can then scale that number for yourself if needed, depending on the factors I listed above.

The numbers from your financials will now help. How big is your disposable income? The next thing that matters is in which industry you are in.

This is the average digital marketing spend by industry:

According to most studies, the average product and service businesses spend around 10-15% of that income on marketing. On the other hand, SaaS companies take it to the next level with averages around 35+%.

Manufacturing handles around 20% of their disposable income. And these are the modest numbers, they go even higher if you want to accelerate the process with ambitious plans to grow your business by 20+% annually.

Let me break it down for you once more in this digital marketing budget calculator:

According to my digital marketing budget template, your monthly revenues would be $400 000 and your expenses (except marketing expenses) are $200 000. That leaves you with 20k of disposable income. Let’s say you are a B2C company selling furniture. You need 15% of your $200 000 to be put into the overall marketing budget.

That’s $ 30 000 a month to spend on your digital marketing budget which equals 100% of your overall budget in my example.

Now scale it down as you need it and start working.

Another Approach You Can Try: The 70-20-10 Rule

Looking for a simple and helpful strategy to determine your digital marketing budgets? 

Try the  70-20-10 rule. 

Each number in the 70-20-10 formula stands for a share of the budget you can spend on different things. 

It works like this:

• spend 70% on “now”
• spend 20% on “next” 
• spend 10% on “new” 

In other words, you should spend 70% of your time and money on proven strategies for your business. 

The next 20% should be spent on things on the horizon (e.g., a new service or product line).

Finally, the last 10% should go to new and unknown. This refers to innovative strategies that help you differentiate from your competition. 

The Aftermath

The final step is to REVIEW the data you have.

It is the analysis where most people fail.

They come up with some number and they leave it there for years. Social media is a big trend for the past decade and it posts bigger and bigger growth every year.

In a recent survey run by Duke University over 400 senior marketers were generally wrong about how much to put into the social media marketing budget. You need to be just in pace with the market movements.

If the social media industry is growing by 25% a year, you must get in line with those numbers and gradually increase your budget. According to IBISWorld, this industry has grown 23.9 % a year-on-year between 2016 and 2021.

When it comes to ad spending on social media networks, it is predicted to grow 10.55% per year. With this pace, it should reach $229 million by 2025 (Statista). 

The industry is changing every second and you must evaluate and improve your digital marketing budget constantly. The marketing itself is a service that brings in extra revenue. If the overall strategy does not bring in new revenue to the table, you should better try something else.

As I said before everybody nowadays uses the internet and you should get in line with the numbers.

Even grandmas have Facebook these days.

Assessment is maybe the most vital part of all. You should be able to compare the past results to the ones after you implemented your strategy accompanied by the digital marketing budget.

Look at the changes in revenue.

If the revenue has indeed increased by $100 000 a month, but the strategy costs you $110 000 you still aren’t doing good results. You would be surprised how many people don’t get this. Also if possible try to pinpoint the exact advertising source that brought you that extra revenue and make sure revenues aren’t influenced by outside factors like holidays or seasonal changes.

So to wrap everything up – write a strategy, get financial information, set your budget, and evaluate the results. It is not that hard…