How much should I spend?
How much are others spending?
Should I be spending more or less?
These are fairly common questions when it comes to spend on digital marketing services.
And they’re not easily answered.
That’s because it depends who’s asking the question, and who’s answering it.
Some food for thought:
- The U.S. Small Business Administration recommends spending 7-8% of your gross revenue for marketing and advertising if you’re doing less than $5 million a year in sales and your net profit margin — after all expenses — is in the 10-12% range (source).
- SMBs spend $17,000 annually on web marketing services, and are spending $6,800 annually for online advertising such as PPC, display ads, retargeting, social media ads, etc. (source).
- Two-thirds of SMBs spend less than $500 per month on digital marketing services (source).
That’s quite a range when it comes to budget for your business.
And it’s true. In my experience I’ve worked with clients spending $500/m all the way up to $20K/m if you include Google AdWords spend.
So the question becomes not what SMBs spend on digital marketing services, but what your business should spend on digital marketing services.
Tips for finding your budgeting sweet spot:
Find out what Your Competitors are Spending
Audit your competitor’s digital marketing by looking at their website, email campaigns, social media accounts, Google ads and landing pages, and even their keywords and PPC spend with tools such as SpyFu or iEspionage.
However, keep in mind that you should always aim to be different than your competitors, and that includes your budget.
Build Flexibility into Any Budget
Anything that works do more of. You shouldn’t constrain yourself to a predefined budget every month or quarter when you’ve found something that really works.
For example, if you’re running a PPC campaign with Google AdWords on a $1000 per month budget, and you’re seeing great returns via new customers and sales, then increase your budget.
Remember, you only need to find “one thing that works” in digital marketing, and once you find it, do as much of it as you can.
Remember Marketing is About Continuous Testing & Optimizing
You will waste budget, everyone does.
But take the approach that every campaign, success or failure, is a chance to learn.
If that social media campaign drove no leads, that email campaign got no conversions, or that online sale had few buyers, you can either b) not do them again and save your money in the future, or b) learn why they failed and do them differently in the future.
There’s a component of digital marketing called conversion rate optimization (CRO) where you test different headlines, colours, images, prices, and see what users respond to the most. Some tests will win, some tests will fail – but you’re learning each time. I think all of digital marketing should be approached like CRO.
Balance Your Budget Between Attracting, Converting & Keeping Customer
I wrote about this a few weeks ago, you can find the full blog here.
Too many businesses blow their budget on attracting new visitors and prospects to their website with digital.
But you should allocate budget into ensuring your website is designed for conversion, and have a solid testing plan to optimize key conversion and landing pages.
As well, don’t forget to keep existing prospects and customers engaged with valuable content, by building relationships on social media, by sending helpful tips in email newsletters, or inviting them to engage in contests or even your blog or content creation process.
Keep them top of mind, and they’ll do the same.