The goal of this article is to give you guidance on how to set a marketing budget.
How Much Should You Budget for Marketing Expenses?
A major concern for many companies regarding the start of a new year is how to effectively grow and compete compared to the previous year. This calls for new strategies and budget compilations. In this article, you will find information regarding:
How much is being spent on marketing?
Where is the majority of spending invested offline and online?
What marketing strategies are attracting improved results?
The responses to these inquiries originate from a couple of authentic sources, which include the Chief Marketing Officers’ annual survey, a well-known research group report on the trends and predictions of interactive marketing and other leading digital marketing research companies.
This brings us back to our original dilemma, which is how much should you budget for marketing expenditure. According to the CMO’s survey, the marketing budget for B2B firms fell between the 5-6% range, whilst the marketing budget of B2C was around the 11-13% range1. The figure for B2B’s marketing budget has risen to 7-9% range, however, the range for B2C’s marketing budget has decreased to 9%1.
It is important to highlight that these figures reflect the total marketing investment and doesn’t focus only on media or advertising expenses. They accumulate elements such as advertising costs, customer relationship management, media spend, marketing staff, investments paid to agencies and much more.
Organisations aiming at capturing a large chunk of the market share will remain on the optimal side of these averages whereas, firms planning for humble growth will be on the lesser side. In addition to this, the competitive nature of a particular marketplace will influence how much a company will spend on marketing efforts. Regardless of how much budget you set aside for marketing endeavors, the next crucial question to ask is where is this budget being allocated.
Why Is It Important to Set A Budget For Online Marketing?
Creating a solid marketing budget allows you to keep track of how much you invest in both online and offline sources. Without a robust marketing budget, you might accidentally overspend on channels, which aren’t producing effective results. A marketing budget highlights the crucial areas that require investments along with areas that aren’t doing well. It provides an effective approach to spending money in the right places at the right time.
Companies can use analytics to measure the value of their online marketing efforts and determine which source is the most effective of all. More and more organisations are turning their attention towards online marketing as opposed to offline techniques.
However, many are faced with the problem of identifying which channels are the best source for generating qualified leads. Therefore, it is recommended to invest in professionals who are highly qualified and experienced in analysing and measuring online channels.
Time is a valuable resource and companies need to realise that it is vital to identify which sources are proving to be beneficial for them that will lead to optimising conversions well before their rivals realise this. If you want to successfully compete against your rivals, it is necessary that you embrace online marketing tactics, which will generate improved results.
How to Distribute Marketing Budgets Between Channels
With advancements in technology and innovation, more and more companies are embracing the digital world. They are now focusing upon directing a majority of their budgets towards online marketing. According to the survey, it is estimated that on average, firms will allocate 30% of their marketing budgets towards online efforts. This is further expected to grow to 35% by 2019. First in line is search engine marketing that attracts the largest share of online spend followed by online display ads as the second largest share. Social media investments account for only 15% of the total online spend, but is expected to grow in the near future.
Once again, keep in mind that these averages are expected to vary according to the competitive marketplace, the nature of the business and how target audience responds to the specific channel. Finally, here’s a look at what marketing strategies have provided improved results.
According to surveys conducted by leading digital marketing research firms, email marketing, SEO and content marketing have proved to be the most effective channels in terms of ROI. Marketing automation has served as an efficient platform in bringing together the most successful marketing tactics to achieve improved results.
How Much is a Qualified Lead Worth?
In order to determine whether your marketing campaigns are earning money, it is important that you measure the value of qualified leads. If you are spending more on a particular lead only to find out that it hasn’t attracted enough business as you had expected, then you have a problem. Qualified leads are a great sign for optimisation. If you want to determine which channel is generating top value leads, then you can calculate the value of traffic directed from such channels. Maximising your web experience will encourage more conversions, which will further improve lead value.
Calculating the worth of a qualified lead is based upon assessing it against conversion ratio and the average lifetime customer value of a company’s client, which consists of future purchases, referrals, retention and testimonial value. Measuring lead value heavily impacts the distribution of your marketing budgets. For instance, if a lead generated from PPC costs you £4, but a lead produced by social ads cost you £1.50, it is most likely that you will invest more of your marketing budget in social ads. Understanding the worth of your lead is eye-opening as you might notice that you are wasting resources in channels that are producing leads, which are too costly for the company.
Companies that are struggling to determine how much they should spend on their online marketing campaigns should combine the facts and trends provided by reliable sources along with the calculation of their lead value. This way companies will have a clear roadmap of how much money and time should be invested in which sources to reap maximum benefits.
Now it’s your turn. Set your marketing budget before you think about a website redesign. How much can you realistically afford for the results you want to achieve?