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How Much Is Enough?

A Guide to Determining a Digital Marketing Budget


Like it or not, an effective online presence is essential for small businesses looking to grow and succeed. However, determining how much to spend on digital marketing can be challenging. On the one hand, you want to invest enough to see results, but on the other hand, you are not ready to throw money out the door without a good chance of Return on Investment (ROI).


While there are many different approaches to determining a marketing budget, in this article, we'll walk you through our process of deciding on a digital marketing budget for a small business, with the assumption that the marketing program must prove its worth before it can be scaled up.


Agree on Goals

Before determining your digital marketing budget, you must clearly define your goals. What are you hoping to achieve with your digital marketing efforts? Are you looking to increase brand awareness, generate leads, drive website traffic, or boost sales? By setting specific, measurable goals, you not only have set a metric for success, but you’ve also created a mandate for your marketing agency. They now know what they need to do to satisfy your expectations.


Analyze Margins

Marketing must contribute to the bottom line, but it's also an expense. We start the process by asking clients to share the margins on an item or service. How much profit do you make on each sale?


For example, we determined that one online retailer's $50 sale resulted in $20 of profit. They were selling about $40,000 monthly and netting about $16,000 in profit. We suggested investing 20 percent of the profit in marketing. This company could spend $3,200 per month without seriously impacting its profitability.


When we created a plan to apply that money to marketing and ad spending, we predicted we could increase revenue by 50 percent over the next twelve months. That eventually increased monthly sales to $60,000 while spending $3,200, about 5 percent of their profit. We continued to spend at that level until the client decided they were ready for more growth. We researched plans, made projections, and applied spending in ways that accelerated growth without killing margins.


To summarize, never spend more than you can afford. And the only way you can figure out what you can afford is to analyze your margins.


Set ROI Goals

While setting marketing goals based on profit margins is a good strategic approach, the tactics for each part of marketing must be handled separately. Digital marketing is an ecosystem, and each part of that system plays a different role. Different small businesses need different combinations of elements to meet your goals. And no single digital element will create marketing success.


Instead, create a plan with elements that build off each other's strengths while setting goals for each tactical element.


For example, you may have goals for website traffic, conversion rates, and lead generation. However, a website rarely attracts visitors without support. You may need to include social media posts, ads, Google ads, and SEO support to drive enough traffic to meet your goals. 


While you may want each element to do many things, it's more helpful to give each tool a primary goal and work towards it. Here's how that might work.


  • Website Goals: Drive $50,000 in online sales each month.

  • Facebook Page: Funnel 500 clicks to the website each month.

  • Facebook Ads: Drive $10,000 in monthly sales tracked back to ads.

  • YouTube Videos: Drive 500 visitors to the website each month.

  • YouTube Ads: Drive $10,000 in monthly sales tracked back to ads.

  • Organic Google Traffic: Drive at least 25 percent of total site traffic.

  • Paid Google Ads: Drive $10,000 in monthly sales tracked back to Google ads.

  • Emails: Drive $3,000 in monthly sales tracked back to emails.


Each of the goals stated is at the top level. Think of them as do-or-die goals. Set them in such a way that you feel entirely confident that it's "worth" using that digital marketing tool if the goals are met. In this example, the company must get at least $50,000 in online sales, or it's a fail. 


Other companies will have very different metrics. Two of our larger B2B clients don't track direct online sales. Instead, they track reach, clicks, phone calls, and emails through Contact Us forms. Each of these clients has high-value sales with margins in the tens of thousands, so just a few sales will pay for a year of marketing. They track quarterly sales and adjust marketing based on quarterly needs.


Another client is a public figure for whom more followers translate into more credibility and demand as a guest speaker. Everything we do for that client is developed to drive more followers. Our monthly reporting is focused on followers and views, not sales.


Continually Evaluate

While it takes time to establish clear goals, determine sales margins, and set ROI goals for your digital marketing efforts, this is not a one-time activity. At Cup O Content, we understand the importance of regularly reviewing and optimizing our strategies to ensure continued success for our clients.


We compile a comprehensive performance report for every client each month, highlighting our victories and evaluating shortcomings. This report allows us to track our progress toward our goals and identify areas for improvement. By analyzing key metrics such as website traffic, conversion rates, and ROI, we can gain valuable insights into the effectiveness of our digital marketing campaigns.


No matter how well we've performed each month, we're always looking for ways to test, learn, and optimize our strategies to get our clients to the next level. This iterative approach allows us to stay ahead of the curve and adapt to the ever-changing digital landscape.


Our commitment to ongoing improvement is what sets us apart from the competition. By staying proactive and continuously refining our strategies, we can ensure our clients achieve the best possible results from their digital marketing efforts. Want to know more? Contact us today to set up a complimentary evaluation.

Want to learn more about marketing for small businesses? Check out these articles.



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