Tips for Managing Your Digital Marketing Budget

Managing Digital Marketing Budget

Marketing is an essential part of generating revenue for any business, but the process can look very different from company to company depending on your industry and goals.

The downturn of 2022 and an uncertain economic future means that most companies are now expected to do more with less — which likely means cuts to digital marketing budgets. It also means that keeping an eye on how every dollar spent is more important than ever.

So, here are some tips for getting the most out of your digital marketing spend without wasting time or money.

How to Allocate Your Digital Marketing Budget

As with any budget, when creating a marketing budget, you should focus on how much you’re spending and what that money is being spent on. In order to determine how much is allocated to your marketing budget, you need to figure out all of your expenses and compare that with your company’s revenue.

There’s no hard and fast rule about how much money a company should spend on marketing — every company is different and has different goals and will need to adjust accordingly. Some sources suggest that startups should be spending a minimum of $5,000 a month to establish visibility, but that’s not an easily scalable formula and it doesn’t necessarily reflect particular industries or geographic markets. 

Instead, consider calculating your marketing spend as a percentage of overall revenue. As your company grows, you can increase the percentage you spend on marketing. 

The U.S. Small Business Administration (SBA) recommends that, for businesses with sales of under $5 million per year and net profit margins of between 10-12 percent, you should spend approximately 7-8 percent of gross revenue on marketing. Of that marketing budget, 10 to 50 percent should be allocated specifically to digital marketing efforts. 

Ultimately, the choice is yours, but be sure to properly investigate your sector and competition and be prepared to spend up to 20 percent of gross revenue on marketing for a new entry.

So, what exactly is that marketing budget being spent on? The main expenses you’ll incur can be divided into three categories:

  • Salaries/wages
  • Subscriptions for marketing tools
  • Individual campaign costs

The first two will remain fairly constant as recurring expenses, but campaign costs can run the gamut depending on a number of factors such as time of year, geographic location, platforms targeted, length of campaign and partnerships or sponsorships — just to name a few.

As for your digital marketing budget, some specific costs might include email marketing software, SEO optimization software, social media advertising, content creation and website design.

How to Stay in Control of Your Digital Marketing Budget

Define and follow a marketing strategy 

Before you can create impactful campaigns, revisit your company’s overall business goals. When you are creating a marketing plan to define the brand, position a product and target customers, ensure that each step aligns with the business’s overall strategy. This ensures that your marketing is as effective as possible at communicating the right ideas to customers.

Take inventory of current digital marketing spend

In order to maximize your digital marketing spend, you have to know exactly how much you’re spending and what it is being spent on. Some common costs include advertising, sponsorships or partnerships, and content creation — which can span videos, website design, blogs, social media and thought leadership.

SaaS spend is another big expense within digital marketing budgets, as it can include email marketing tools, social media management platforms, analytics tools, project management software, webinar and video hosting software, website hosting, design software, cloud storage and more. 

It’s critical to keep track of how much you’re paying for each of these every month, but also to keep track of how much they’re being used. You might be paying for more licenses or logins than you need or paying for zombie subscriptions — and reducing the number of subscriptions could be an easy way to save a bit of money.

Measure results

Of course, once you’ve set the marketing strategy and budget, you’ll need to measure results to know if your plan is working — and adjust accordingly if you aren’t seeing positive results. KPIs will differ based on the industry and company, but a few metrics are pretty universal. 

Run rate predicts the future financial performance of a company based on current financial data, so it’s important to keep it up to date each month as performance can change drastically (and hopefully for the better because of your marketing efforts!). To calculate run rate, take your revenue from over a month and multiply it by 12 to predict your annual revenue. 

Calculating the run rate for your marketing channels budget can help you monitor campaign spending throughout the month to ensure you are staying on track for both that month and the year at large.

Burn rate, meanwhile, calculates how much longer a company can continue to function before running out of money (or needing to turn a profit). First, find the gross burn (total monthly operational expenses – revenue) and then calculate the burn rate by dividing the amount of cash left by monthly spend. 

For example, if a company spends $50,000 per month but is generating $20,000 per month in revenue, their monthly gross burn would be $30,000 per month. If you continue to burn $30,000 per month and have $180,000 cash on-hand, you only have six months of runway before running out of cash.

It’s also important to measure how many leads marketing campaigns are bringing in, as well as the cost per lead, cost per opportunity and cost per customer. Tracking a customer throughout the sales funnel will take time, but will provide useful insights and eventually revenue. 

Other common KPIs for digital marketing budgets include revenue per lead, website traffic, channel views, CTA conversion rate, time spent on page and organic traffic results.

Once you’ve got your metrics in place, measure and track your spend and be sure to adjust the plan when you start to see what is working well and what isn’t.

Tips for Maximizing Your Digital Marketing Budget

Just because you’ve allocated a certain percentage of revenue towards your marketing budget and created a marketing plan for the year, unexpected expenses can crop up at any time and the macroeconomic situation can change in a flash. 

So, in addition to building in some contingency money into your budget, you’ll also want to maximize your existing budget as best you can. Here are some of the best ways you can do that for your digital marketing budget.

Focus on the most effective platforms

With so many online and social platforms to advertise on, you’re probably wondering, “Which paid platforms should I invest in?” There is no one single answer, but a little bit of research can go a long way.

Use your own data to see what campaigns have been the most successful, which marketing channels have the highest ROAS (return on ad spend) and where most of your leads are coming from. If you’ve noticed that your target audience has moved away from one platform in favor of another, you should consider doing the same.

In fact, Mesh’s Q3/Q4 spend trends report found that although overall digital advertising spend was down amidst an economic downturn, there was one only platform where businesses upped their spending: TikTok. As the app continues to explode in popularity, Mesh customers have adjusted their ad spend to allocate more of their budget towards TikTok, while spending less on Google Ads, Facebook and LinkedIn.

Set a test budget

In order to ensure that your digital advertising lives up to its potential, you’ll want to factor in some of your budget for testing. Generally, companies allocate 10 to 20 percent of their digital advertising budget to testing.

The key is to strike a balance: you don’t want to spend all of your test budget on one channel, but if you spread your budget too thin across too many channels, you won’t see great results.

As a starting point, look into digital advertising benchmarks from across your industry. This should give you guidelines as to how much you should be spending on testing specific channels.

Use seasonality to your advantage

Most digital marketing plans divide the year into quarters, and each period has advantages and disadvantages. But by understanding seasonality, you stand a better chance of getting the most out of your ad spend all year round.

Q1 is generally the slowest quarter of the year, with everyone eager to spend less after the onslaught of expensive holidays (Black Friday, Thanksgiving, Christmas, New Years) from the previous quarter. This is a good time to experiment with redesigns and new strategies, and to A/B test new ads.

Q4, however, typically sees a reduced CPM (cost per thousand impressions) as this is a high-traffic time of the year. Use this to your advantage by increasing your spend while traffic is already higher and perhaps save on some money during the new year or summertime slumps.

Of course, holidays also provide a great opportunity for seasonal advertising, so be sure to plan ahead for major events in each quarter to remain timely and relevant to audiences. There are even “social media calendars” available online to participate in slightly less official celebrations like #NationalPizzaDay and #NationalPetDay.

Use templates 

Templates are a godsend for any tasks that are recurring or need to be tracked over a long period of time. They keep everything organized and ensure that you are collecting the right information every time you need to consolidate data.

Here are just a few of the digital marketing templates you might want to use or tailor to your specific needs:

  • Marketing budget planning sheet [Hubspot]
  • Campaign monitoring sheet [Mesh]
  • SaaS subscription tracking sheet [Microsoft]
  • Marketing persona template [Buffer]
  • Email templates [MailChimp]

How to Determine Budget Cuts

The reality in 2023 is that many businesses are being asked to do more with less, and as such, many need to make cuts to their budgets in every department. In the realm of digital marketing, it can be tricky to know exactly where to start making budget cuts — especially in the midst of long-running campaigns or new experiments.

It can be tempting to cease ad spend altogether — especially since the sales cycle can take multiple months, quarters or even years. But this will be detrimental to your business in the long run. Instead, take an in-depth look at exactly where your leads come from and start by making cuts to the campaigns generating the least pipeline and revenue. This might mean temporarily pausing ads on specific channels or refocusing the keywords you target.

It takes a bit more work up front, but analyzing your digital marketing performance and making strategic decisions is much more beneficial than the “haircut method” where everything gets cut by the same amount (i.e. 10 percent shaved off of every digital marketing campaign).

Final Thoughts 

Digital marketing is an integral part of any company in 2023, but the economic reality dictates that purse strings are tightening at most businesses. So, it’s more crucial than ever to optimize digital marketing spend by ensuring that efforts are being put towards the campaigns and channels that are generating the most leads and most revenue. Strategic cuts can help your team save money without sacrificing the quality of your marketing program. 

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