How to Determine Your Digital Marketing Budget

Laurence Williams | June 28, 2021 MARKETING STRATEGY

It’s a question we see a lot:

The Balancing Act

The Simple Answer

You also need to split your marketing spend between brand development costs (your website, blogs) and the costs of promoting business (campaigns, events). There are 3 big questions to answer. ->

1. Where is your audience?

2. What are your goals?

3. How much can you spend to gain a customer?

Choosing Channels

Channels

Still, many factors impact spend:

Marketing Expenses Fluctuate

The Answer

How to Determine Your Digital Marketing Budget

How to Determine Your Digital Marketing Budget

It’s a question we see a lot:

It’s a question we see a lot:

What percentage of our sales should we, as an ecommerce company, spend on marketing?

The Balancing Act

The Balancing Act

Marketing budgets are tricky: either you spend too much and put yourself in a bad cash flow position, or you spend too little and no one even knows your products exist.

The Simple Answer

The Simple Answer

7-12% of sales is recommended and should be sustainable for marketing your business, but there are instances where you may need to spend up to 30% of your total revenue on marketing.

You also need to split your marketing spend between brand development costs (your website, blogs) and the costs of promoting business (campaigns, events). There are 3 big questions to answer. ->

1. Where is your audience?

1. Where is your audience?

Different people exist on different parts of the web, and they change platforms often. Learn where your audience is and where they’re most likely to respond to marketing.

2. What are your goals?

2. What are your goals?

Are you trying to hit your sales quota, a customer acquisition goal or generate a certain number of leads? Each goal requires its own strategy.

3. How much can you spend to gain a customer?

3. How much can you spend to gain a customer?

When investing in your marketing efforts, you should know how much you are willing (and able) to spend on acquiring a new customer.

Choosing Channels

Choosing Channels

Once you’ve determined a total marketing budget, you need to break it down into channels. Even ecommerce businesses should diversify so that they don’t purely exist online or on one channel.

Channels

Channels

- Paid Search - Direct Mail - SEO - Referrals - Affiliate Marketing - Email - Content Marketing - Social Media - Product Listing Ads On average, ecommerce brands spend 10-24% of their budget on SEO and 29-57% on PPC.

Still, many factors impact spend:

Still, many factors impact spend:

- Competitive activity - Aggressive growth - Timing - Customer experience - Industry

Marketing Expenses Fluctuate

Marketing Expenses Fluctuate

Whether it’s because of the seasonality of the product you offer or your competition changing their strategy, you might have had a bad quarter or a great one.

The Answer

The Answer

Making your budget a fixed percentage of revenue maintains a cash-advantaged position, but the answer isn’t so simple. To learn more about analyzing budget factors and measuring effectiveness, read the full blog.