Are You Investing Enough Into Your Digital Marketing?

By Daniel Hales |
Published 08/03/2021

It can be tough to know how much budget you should be putting into your digital marketing. Too much and you may find it unsustainable, too little and you may struggle to reach the levels of growth you desire.

If you’re unsure about what you should be spending this post will help you to work out a level that’s right for you.

First, what’s your overall marketing budget?

If you don’t know what your overall marketing budget is, you’re not going to be able to work out what your digital marketing budget is. Here we look at what the normal expectations and what questions you should be asking yourself when determining your overall marketing budget.

The marketing budget usually comes from a percentage of your turnover, with the average being around 8%. However high growth companies tend to spend a higher percentage on their marketing with around 20% of turnover being invested in marketing.

Usually the higher percentage of turnover you can put into marketing, the higher your business growth rate.

But that doesn’t mean put all your money back into marketing, you have to make sure it’s sustainable too. The key here is to work out what your maximum cost of sale is. In essence this is how much profit your business makes before marketing expenses as a percentage of your overall turnover. Your marketing budget percentage needs to be below this or you’ll end up losing money.

Other considerations should be around your industry, the opportunity available and what difference the marketing budget will make.

Hopefully this has helped you work out your marketing budget for the year, this should hopefully be between 8-20% of turnover, and you should have a set monetary figure in mind.

How much should be spent on digital?

Now you need to work out how much of your overall budget needs to be spent on digital marketing. This can be a little more challenging as there’s no set rules and it can vary hugely business to business. Here are the steps we’d suggest taking when making your decision.

Analyse Your Previous Budget/Spend

The first place to look is at what happened in your last budget period. Not only can you look at what the percentage of spend on traditional vs digital marketing was, but you can also look at what performed best. If you found that most sales were generated from traditional marketing then that’s where you want to put more of your money and vice versa.

It also helps you to determine what key events where you need to spend money. If you have a big event, such as an expo, where you know what the cost is going to be, you can make sure that this is accounted for in your budget.

Understand potential spend

Your budget should also keep in mind realistic activity spend. There’s no point in putting £10,000/month into Google Ads if there’s only £1,000 worth of searches each month. Before you set budgets for different channels it’s therefore important to understand the potential of each channel as well as what you should be expecting to spend.

Once you put this altogether you should have a better understanding of what your digital marketing budget should be. It can sometimes be tempting to go 100% one way or the other, we’d suggest avoiding this and going for a mix at least at some level in order to at least test the waters. You never know, you might get unexpected results from something you hadn’t previously thought about.

Agency vs In-house

Agency vs in-house is an often asked question when it comes to hiring for your marketing activity. What your budget is will ultimately determine this. When you consider all the different specialisms within marketing, you need a team in order to execute it and having a full time team yourself can quickly take up all your budget, especially for smaller sized businesses trading under £1m turnover each year.

For those companies we’d highly recommend the use of agencies in order to complete your marketing activity. Whilst the hourly rate will be much higher, you get to use an expert in the field for each activity and it usually comes at much lower cost than having a full time generalist.

If you’re interested in using an agency for your digital marketing, you can get in touch here where we will be able to advise you on the best path for your business.

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