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How do i determine my digital marketing budget?

There are two key elements regarding digital marketing spend when speaking to a digital agency or anyone promoting themselves as digital marketers, they are budget and management fee. These two costs should be clearly identified before committing to the launch of any sponsored or managed campaign.

However, what if you are running your own digital marketing and need to determine a budget?

“If you’re a sailor, check your boat for holes before you set sail. If you’re not a sailor, consult one.”

Digital Ability

Here are some determining factors and ways in which digital marketing budgets can be established.

1. Choose a commercial focus

What is the purpose of your digital marketing plan? What are you promoting? Digital marketing platforms such as Google, Facebook and your very own web site enables you to specifically promote and specialise in specific areas of your business offering.

Do not attempt to promote your entire business offering through a single focus or sponsored ad; instead, determine your area(s) of business that you would wish for everyday or in a perfect world scenario – use your digital marketing to specialise.

Once you have created a focus or set of focuses, you can then determine specific budgets for each based on your estimated return per focus.

2. Establish your average order value (AOV)

Once you have pinned down your focus(es), you can then quite easily establish the average revenue generated through each focus e.g.

  • Focus #1: Selling new ink jet printers (average order value = £200)
  • Focus #2: Selling printer ink toner (average order value = £80)

Although Focus #1 has a greater AOV, is it worth investing more budget into this focus rather than Focus #2? The obvious answer is yes because it has a greater AOV. But what about the frequency of sales? Surely more people will order ink toner more often than a new printer.

Ultimately, when it comes to budgeting you must ensure that you can cover you costs and then make a profit.

3. Do you offer a service or product?

It makes a significant difference! Providing a hands-on service such as appointment based bookings or on-site jobs such as plumbing or construction limits the number of bookings or jobs you can realistically complete in a day, week or month. If this is the case then your budget will be constrained to the number of bookings or jobs you can complete. Will you be able to cover your costs?

However, if you sell products, especially via ecommerce, then you can quite rightly sell many products simultaneously. In this case you can quite reasonably invest a greater budget even if your AOV is particularly low.

4. Carry out relevant performance forecasting

Each digital marketing platform such as Google, Facebook or any other robust platform will provide a forecasting tool or at least historical data specifically related to your chosen focus area(s).

A forecasting tool should allow you to base a forecast on a specific business area/focus and to set a daily or monthly budget. The forecasting results will provide crucial information regarding estimated click throughs, cost per clicks, cost per leads and focus-specific conversions. Such data would be used to determine the level of budget required to produce a calculated, albeit, estimated return.