How To Allocate Your Digital Marketing Budget Wisely?

When allocating a budget for your marketing efforts, you need to take numerous factors into account. While ensuring that the budget is sufficient enough to achieve your goals, you have to put some amount aside for other expenses as well. All this makes digital marketing budget allocation quite a challenging process. But as long as you are following the right approach, you can come up with the right decision. You should first understand what percentage of your total budget should be spent on digital marketing and how you can make the best use of it. Let us discuss the same in further detail through this article:

Understanding Marketing Budget

The marketing budget of a business involves all the expenses that they intend to spend for marketing and promotional purposes. This includes all the spends made on paid media marketing, advertising, social media marketing, and all other subsets of traditional as well as digital marketing. The marketing budget may vary from brand to brand based on the individual needs and objectives of a business. 

Although there is no specific approach that every brand should follow when allocating a marketing budget, there is a general breakdown that many businesses often follow. As per this breakdown:

• 45-50% of the total marketing budget should be spent on digital marketing
• 20-30% should be spent on traditional marketing tactics
• 10-20% on organizing events or on sponsorships
• 5-10% on research and data analytics

This breakdown allows businesses to precisely maintain a balance between traditional and digital marketing while also saving some of it for research and analytics purposes.

How Much Should You Spend on Marketing?

Now, you know how to break down your marketing budget, but do you know what your marketing budget should be? What is an ideal marketing spend? There is no fixed amount that is considered ideal for a marketing budget. However, you can decide on a fixed percentage of your total revenue and spend it on marketing.

As per a survey, businesses spend an average of 9.5% of their total revenue on marketing. But if your business is in its initial phase, you might have to take this up to 15-20% of your total revenue. Talking about digital marketing, it should take around half of your total marketing budget, i.e. 50% of the total budget. This is because digital marketing holds the utmost power today. It can help your brand reach another level of heights within no time and hence should be given the largest portion of your total marketing budget. 

The 70/20/10 Rule for Marketing Budget Allocation

Now that you have a basic idea of how much you should spend on marketing and what percentage of it should be allocated for digital marketing, let us discuss a popular concept: The 70/20/10 rule. According to this rule, you should spend:

• 70% of the total marketing budget on proven marketing strategies
• 20% of the budget on new marketing initiatives and latest approaches
• 10% of the budget on experimentation

Steps for Allocating a Digital Marketing Budget

To precisely allocate a digital marketing budget for your business, you can follow the below-mentioned steps:

1. Analyze Your Buyer’s Journey

Your buyer’s journey refers to the steps involved in a lead turning into a paying customer. You should closely look into how your target audience finds your products or services, how they interact with your brand, and what type of marketing drives the maximum engagement. Based on this information, you can find out which digital marketing tactics are performing well and which ones are not suitable for your business. This helps you adjust your marketing budget accordingly.

2. Review Your Marketing goals & Align Your Budget with It

Your marketing budget can also depend on your short-term and long-term marketing goals. If you are looking to push sales for a particular product, you might need to run a social media contest for it. Or if your short-term goal is to expand your team, you might need to collaborate with the social media team and get your job requirements to reach the right candidates. Based on your goals, your marketing budget may vary.

3. Review Previous Year Results

Without reviewing the performance of previous marketing campaigns, you will never know whether you are utilizing your marketing budget or you are wasting a huge amount. If you spend a large portion of your marketing budget on social media ads, but it results in very few clicks and conversions, it is advisable to utilize this budget elsewhere. Maybe, blogging or some other strategy works more in your favor. Before you allocate a marketing budget for a new month, carefully think about whether it makes sense to continue spending on a particular strategy or not. If it doesn’t, just allocate the budget for something more useful.

4. Keep in Mind That There are Hidden Marketing Costs

When marketers allocate a marketing budget, they majorly think of promotional and advertising activities. But you also take into account other costs that might go unnoticed. If you don’t consider the costs associated with market research, campaign development, freelancers fees, and other such small factors, you will end up thinking ‘Where did I spend such a huge amount of money?’ To avoid this, make sure that you also save some percentage of your marketing budget for these expenses.

5. Determine Where You Want to Spend

There are plenty of marketing channels, where you can promote your brand. But prioritizing the most suitable ones is important. You can run short-term marketing campaigns on different channels to identify which ones work the best for you. Once you know which platforms give you the maximum return, you will have the answer to ‘Where should I spend the most?’

6. Measure ROI

Once you put a certain amount of money into a marketing campaign, make sure to analyze the performance of the campaign and measure its ROI. This helps you determine whether you should continue running such campaigns or opt for a better marketing strategy. If it results in good returns, you can continue investing in it. But if it seems that you wasted your money, just stop investing it in and look for something better

Digital Marketing Budget Allocation Strategies

Based on your business requirements, you can use any of the following strategies to determine the marketing budget of your brand

1. Allocate a Fixed Percentage of Net Revenue

This is one of the most widely used method for digital marketing budget allocation. You can allocate a fixed percentage (10-15%) of your total revenue towards marketing efforts. With this, you can ensure that you allocate a decent budget to marketing without negatively impacting your company’s overall financial health.

2. Budgeting Based on ROI

This is another method of marketing budget allocation in which companies allocate a budget based on potential ROI (Return on Investment). You can determine expected ROI based on past performance of your marketing campaigns or by analyzing market data. If done effectively, this method can result in maximum effectiveness of marketing efforts.

3. Budgeting Based on Objectives

Sometimes you intend to achieve specific goals with a marketing campaign and for that, you might need to allocate a budget beyond the competitive standards. This is called objective-based budgeting. You can determine a budget based on what you want to achieve and which marketing strategy can give you the desired results.

4. Competitive Parity

This is another method for budget allocations, where you can decide on your marketing budget based on how much your competitors are spending on marketing. This method is specially effective if you want to outperform your competitors or at least maintain your online visibility.

5. Seasonal Budgeting

If your business experiences seasonal differences, i.e. more sales in a particular season than others, this budgeting strategy might be suitable for you. You can increase your marketing budget during the peak season and keep it minimal during off-season months.

Maximizing Results Under Your Marketing Budget

Allocating a relevant digital marketing budget and creating a well-planned strategy to achieve your goal under it is not going to be an easy task. It requires quite a good amount of research and analysis of your past marketing efforts to understand how much and where to spend. But MadHawks, being a top digital marketing agency, can make it easier for you. Based on your marketing goals and requirements, we can create a strategic marketing plan that works for your brand while also ensuring that the financial health of your business is not impacted in a negative manner. For any further information, get it touch with out experts today!

FAQs

1. What is the 70 20 10 rule for marketing budget?

Ans. As per the 70-20-10 rule for marketing budget allocation, you should 70% of your total budget on proven strategies, 20% on adopting new marketing initiatives, and 10% on experimenting with new techniques.

2. What is the budget allocation in advertising?

Ans. Budget allocation in advertising refers to the amount you intend to spend on advertising your brand and products/services.

3. What is the ideal budget allocation?

Ans. The ideal budget allocation for digital marketing is 50% of your total marketing budget. And the total marketing budget should be around 10-20% of your total revenue. 

4. How do you approach budgeting and resource allocation for ad campaigns?

Ans. Here are a few steps that you can follow for budgeting and resource allocation for your ad campaigns:

• Align the budget with your goals
• Determine where you want to run the ads
• Review previous campaigns’ performance
• Also consider hidden marketing costs
• Measure ROI

5. Why is a marketing budget important?

Ans. Allocating a budget prior to running marketing campaigns is important to ensure that you don’t end up overspending and affecting your brand’s financial health.