How to Decide on Your Digital Marketing Budget for Small Business

The best marketing doesn’t feel like marketing. – Tom Fishburne.

How many times have you heard that catchy concept of great products selling themselves?

Probably many.

And it has probably made you wonder whether you should pour all that money into marketing campaigns. If your product is great, that is.

The truth is that in today’s fiercely competitive and saturated marketplace, it’s more important than ever to promote your products and services and set your company apart among your competitors. A well-planned digital marketing budget for small business is essential to attract customers and generate leads.

Besides, people need to hear about your fantastic product before they can decide to give it a try.

Given that 89% of Irish households have internet access, while 7 out of 10 internet users spend time on the web every day, it’s quite obvious that digital marketing can help you improve the visibility of your company and spread the word about it. Small businesses with a modest marketing budget spend considerable resources on digital channels to reach their target demographic effectively.

So, think of your marketing budget as an investment, not an expense.

But you need to plan your marketing spend carefully if you are to succeed.

Understanding Your Business Goals

Before diving into the numbers, it’s essential to have a clear understanding of your business goals. What do you want to achieve through your marketing efforts? Are you aiming to increase brand awareness, drive more traffic to your website, generate leads, or boost sales? Having well-defined goals will guide you in determining how much to allocate to your marketing budget and which marketing channels to prioritize.

Consider these questions to help you define your business goals:

• What are your short-term and long-term goals? Knowing what you want to achieve in the immediate future versus the long run will help you allocate your marketing budget more effectively.

• Who is your target audience? Identifying your ideal customer will help you tailor your marketing efforts to reach the right people.

• What sets your business apart from competitors? Understanding your unique selling proposition will help you craft compelling marketing messages.

• What are your key performance indicators (KPIs)? Defining KPIs such as website traffic, lead generation, and sales conversions will help you measure the success of your marketing efforts.

By understanding your business goals, you can create a marketing budget that aligns with your objectives and sets you on the path to success.

Create a Game Plan

First things first.

Having a well-thought-out marketing plan should be your main focus before you start thinking about numbers. Small business owners often struggle with determining how much of their total revenue should go toward marketing expenses.

This is a list of questions that you should ask yourself when you’re working on your marketing strategy:

• Why does my business exist? According to Simon Sinek, this “why” defines the core of your business and explains its purpose.

• What are my business goals and how to accomplish them? Don’t forget that every objective needs a timeline attached to it. Your digital marketing strategy should align with these business goals.

• Who’s my target audience and where I can find them? This is the part where you should create your ideal customer profile to help attract customers more effectively.

• Who are my competitors? You need to find out where you stand and how you stack up against other similar companies in order to be able to step up your marketing game.

• What makes my business distinctive? Define your unique selling proposal, that is, the reason why people should pick you over your competitors.

• How much will I charge? Define your pricing and align it with the value and the clear benefits that your offer brings to your customers.

• How will I reach my target audience? Outline your promotional plan and list all the digital marketing strategies and tactics that you want to use across various digital marketing channels. Start small with three to five particular activities that will help you execute your strategy and drive more sales.

• What particular tasks do I need to complete if I want to achieve my marketing goals? For example, establishing objectives, deciding on your CTAs, and getting someone to craft you the copy can be some of the steps to increase website visitors.

• What are my results and what should I improve? Monitoring your marketing performance is crucial for the success of your marketing strategy.

Understanding Small Business Marketing Budgets

Establishing a small business marketing budget differs from what established companies might do. Local businesses often need to focus on digital advertising and marketing efforts that reach their local community. This might include local SEO strategies and targeted social media ads that help generate leads and build a customer base.

The Small Business Administration suggests that businesses spend 7-8% of their total revenue on marketing, though this can vary based on industry, competition, and growth stage. New businesses attempting to increase sales and gain market share may need to allocate more marketing dollars than established companies with a loyal customer base.

Crunch Numbers

What you may be asking yourself now is:

How much money should you spend on your overall marketing efforts?

This question puzzles many a small business owner, especially since they’re usually strapped for cash and can’t exactly splurge on fancy commercials and ads.

And yet, there’s no one-size-fits-all answer when it comes to a good marketing budget.

According to the recent Gartner CMO Survey, marketing budgets hovered around, on average, 11.2% of company revenues in 2018. CMOs expressed optimism regarding the growth of their budgets in 2019, despite global uncertainty – even though the Irish economy could suffer a 7% GDP hit due to Brexit.

Your decision about an average marketing budget pretty much boils down to 3 factors:

• Is your business established? If your company is still bordering upon obscurity, then it’s a good idea to spend more marketing dollars and put it in the spotlight to attract more customers.

• What’s your industry? Research how much your direct competitors are spending on their marketing costs.

• How much can you afford? Don’t spread yourself too thin and risk jeopardizing your financial stability, especially now that there are numerous affordable and yet effective marketing tactics that can deliver a positive ROI.

Here are a couple of methods that can help you set your marketing budget:

• Revenue percentage. Based on this approach, new companies should allocate 12-20% of their gross revenue on marketing. Too much? It’s certainly a significant amount, but you need to reach your target audience and inform them about your product. The thing is, young enterprises need to attract new customers, establish their brand, and build a reputation. Naturally, all these activities come with a hefty price tag. But, once you achieve these objectives and develop your company, you can bring down your budget to 6-12% of your total revenue. One of the benefits of this method is that it allows your budget based on revenue to grow together with your business, thus additionally expanding your presence and brand awareness. However, if your margins are below the range of 10-12%, or if you’re operating at a loss, this method isn’t the best solution.

• Fixed budget. Sometimes small businesses have to plan within their means and opt for a fixed amount that they can afford. But this method requires a detailed marketing strategy. It’s crucial to determine what kind of campaign is the most effective for your business, as well as what you want to achieve with your marketing efforts – bring in more traffic, increase sales, or grow your social media following. If you’re not sure about how much money to allocate, talk to your fellow business owners, or spy on your competitors, but make sure that you’re in the same league both in terms of revenue and size.

Common Marketing Costs to Consider

When crafting your marketing budget, it’s crucial to account for the various costs associated with your marketing efforts. Here are some common marketing costs to consider:

Allocating Across Different Marketing Channels

Digital marketing is on the rise, that’s for sure, but this doesn’t mean that you should abandon traditional advertising methods completely.

You need to find out what works for your business and split the budget accordingly.

While the average company is expected to dedicate 42% of its overall budget to digital marketing, some industries can still greatly benefit from direct mail, TV commercials, billboards, and similar old-school methods. Marketing investments should be spread across channels that deliver the best results for your specific business needs.

It’s best to combine several strategies and channels but make sure to identify what your target audience prefers.

When it comes to cost-effectiveness, it’s worth mentioning that though certain approaches might initially require a substantial amount of money, they’re capable of generating a high ROI very quickly – working with a Google Ads Agency on your PPC campaign is one of them.

Let’s see a breakdown of indispensable marketing platforms that you should leverage.

1. Email marketing. It’s true that some marketers believe this strategy is on its last legs, but stats say otherwise. With an impressive 4400% ROI, email marketing should be an indispensable weapon in your marketing arsenal. It’s particularly helpful for building loyalty, and you can use it to send informative and helpful newsletters to your customers, in which you’ll let them know about your latest product updates, news from the industry, or share useful pieces of content or how-to guides.

2. Social media marketing. Social media platforms can be used to expand your reach and build brand awareness and recognition. However, small businesses should be careful and focus on one or two channels favoured by their audience. According to a survey, Facebook is the most popular network in Ireland with 46% of those registered who use it regularly. It’s followed by Instagram (24%) and Twitter (20%). Monitor your metrics and optimize your social media posts based on the engagement of your followers to improve your overall marketing performance.

3. Content marketing. Nurture your audience by creating helpful, educational, and entertaining content packed with valuable advice. Hire a professional writer who will know how to address your audience’s interests and pain points in the best way and attract them to your blog. Quality content can help businesses spend less on traditional advertising while still reaching more customers.

4. SEO. This strategy is something worth investing in, even though it’s pricey. The fact that it takes some time before you notice the first results shouldn’t bother you. In the long run, it will improve your rankings and show your content to the right prospects, outside of email marketing SEO has the highest long term ROI. For local businesses, local SEO is particularly important to reach customers in your local community.

5. Paid Ads. Don’t neglect promotions on social media channels and SERPs. Facebook is limiting free exposure posts, meaning that unpaid views might reach only a small fraction of your audience. Besides, in 2016, organic reach plunged 50%, and you need to boost it with a financial injection.

Getting Expert Advice

Creating a marketing budget can be a daunting task, especially for small business owners who may not have extensive marketing experience. If you’re unsure about how to create a marketing budget or need help determining how much to spend on marketing, consider seeking expert advice.

Here are some options for getting expert advice:

• Hire a Marketing Agency: A marketing agency can help you create a comprehensive marketing budget and provide guidance on how to allocate your marketing funds effectively.

• Consult with a Marketing Expert: Consider hiring a marketing consultant who can offer personalized advice on creating a marketing budget and developing a marketing strategy tailored to your business needs.

• Attend Marketing Workshops and Conferences: These events are great opportunities to learn from industry experts and gain insights into marketing best practices.

• Utilize Online Resources: There are numerous online resources such as marketing blogs, podcasts, and webinars that provide valuable tips and strategies for creating a marketing budget.

By seeking expert advice, you can create a marketing budget that is tailored to your business needs and helps you achieve your marketing goals. This approach ensures that your marketing efforts are strategic, effective, and aligned with your overall business objectives.

Measuring ROI and Adjusting Your Marketing Budget

One of the most important aspects of managing your digital marketing budget is consistently measuring the return on investment for each channel. Businesses spend significant resources on marketing campaigns, so it’s essential to track which efforts deliver the best results.

Marketing investments should be evaluated regularly against key performance indicators (KPIs) that align with your business goals. Are you getting more leads? Seeing an increase in website visitors? Converting more sales? These metrics help determine if your marketing budget is properly allocated.

For small business marketing, it’s important to remain flexible. If certain marketing channels aren’t delivering a positive ROI, don’t hesitate to redistribute your marketing dollars to areas that show better results. Your marketing budget based on performance data will be more effective than one based on industry averages alone.

The Bottom Line

Once you identify which one of these strategies works best, double down on it. Business growth often comes from finding the right marketing mix for your specific situation.

The key to creating a successful marketing budget is in finding the right balance. If you spend too little, nobody will know about your business, but if you’re extravagant, you’ll run out of more money without accomplishing much. Rely on numbers, metrics, and ROI instead of educated guessing when it comes to allocating funds for different marketing platforms.

Remember that marketing expenses vary based on your industry, growth stage, competition, and business goals. What works for one small business may not work for another. The most important thing is to start with a clear strategy, implement it consistently, measure results, and be willing to adapt as you learn what delivers the best return for your specific business.