How to Create a Digital Marketing Budget Plan
Here’s a quick TLDR;
6 Steps to Plan Your Marketing Budget
- Know your costs and revenues.
- Define your marketing goals.
- Align them with your company’s strategic goals and vision for growth
- Work within your annual budget but be agile on a weekly /monthly basis.
- Take seasonality, holidays and industry events into account.
- Evaluate your budget vs results over time and adapt accordingly.
It’s nearly the end of the year, and we all know what that means. It’s time to take a deep dive into planning your annual marketing budget. Whether you manage and execute most of your marketing activities in house, or outsource to a digital marketing agency, your marketing budget is the wellspring for your annual strategy. It will go a long way in defining your performance in the coming year.
A new year is a new beginning. It brings opportunities for growth and change in your digital marketing strategies. You might be entering new territories, launching new products or trying out new marketing channels to build brand awareness.
In fact, according to a recent SEMrush study on the state of content marketing, 62% of marketers are planning to increase their content marketing budget this coming year.
Source: https://www.semrush.com/ebooks/state-of-content-marketing/
More spending means more risk, but it also means more opportunities. When so much is at stake, here are six steps to help you plan your best marketing budget for the year:
1. Know your costs and revenues
Depending on the industry in which you operate, the difference between marketing spending as a percent of company revenues can vary widely:
Source: https://www.webstrategiesinc.com/blog/how-much-budget-for-online-marketing-in-2014
Even within the same industry, every company has its own approach to digital marketing, based on its target audience, KPIs and goals, the competitive playing field and more. All these directly impact the size and style of the budget.
The first thing to do when planning your marketing budget is to take stock of the current situation. What are your operational costs? How much does it cost to convert a customer? How much value do your marketing activities create? What revenues can you attribute to each marketing tactic? Once you know where you stand today, you can start planning for the future.
2. Set your goals
Hubspot research states that 27% of marketers rate securing enough budget as their top challenge! Now for the good news: marketers who calculate ROI are 1.6X more likely to get higher budgets. Before allocating your total marketing budget, you need to define your goals for the coming year. What are your KPIs? How many new customers do you expect to see? What retention rate are you aiming for? As the manager of digital marketing activities, these are the kinds of questions you will need to answer. Not only will they give you direction and purpose, they might even help secure you more budget.
Source: Hubspot State of Inbound 2018 report
3. Align your goals with your company’s strategic goals and vision for growth
Don’t forget though, none of this occurs in a vacuum. Your marketing goals are a key element of the company’s overall strategic goals and vision for growth. There is no point investing your marketing budget in areas that won’t advance the business towards its current targets.
So it’s vital to keep the company’s overall strategy on your radar when planning your digital marketing budget.
The best way to do this is by maintaining a constant line of communication with other departments and with management. This way, you’ll always have an accurate picture of the company’s ongoing and changing status, which will make it much easier to develop a marketing budget that is truly integrated.
4. Determine the budget – but keep it agile
The first step is to determine your total annual marketing budget. Once the yearly sum is set and approved, you can slice it into a monthly plan. The annual budget is set in stone, but if you know how the budget is playing out on a monthly basis, you can afford to be agile within any given month.
‘Agility’ is a nice-sounding buzzword, but what does it mean in practice? How can you set an annual budget, while staying flexible on a monthly level?
By paying constant attention to the ongoing state of your marketing activities. For example, if you’re seeing great results from a specific campaign in a particular month, don’t stop!
Limiting a successful campaign just because you set a budget six months ago, isn’t necessarily the right decision. You may choose to let the campaign run, and see if you can get even more results from it. Then, you can adjust your budget down the road to accommodate for the unplanned increase in spending.
5. Take special events into account
Setting a marketing budget is not just about what’s going on in your company. You need to take into account a whole range of seasonal, holiday and industry events. Seasonality (including the weather, national and cultural holidays, religious events and more) has a huge impact on how and when you invest your marketing dollars
For example, if you are not a retailer or a B2C company, scaling your budget in Q4 could be a bad idea. This is because, at the end of the year, retailers worldwide are tapping aggressively into all existing channels to maximize sales.
The result is a sharp increase in CPCs across all major channels. Competition is fierce, and conversion rates need to be much higher to compensate for the high CPCs.
This also applies to the holidays. You don’t want to push your marketing messages while your audience is taking the week off. Also, keep in mind that different regions have different vacation days and national holidays. So make sure to customize your budget according to the holiday calendars of your target countries.
Check out this holiday marketing guide for more seasonal tips and hacks.
You can also look at your specific industry to streamline your budget. Big industry events are a huge marketing opportunity. Plan your budget smartly around these events, so you can capture your audience when it is more engaged than usual.
If your company is attending a particular event, it’s a great opportunity to connect the online → offline customer journey, and generate leads that will turn into meetings, and (hopefully) into happy customers.
6. Always be testing (& measuring!)
So you’ve allocated your marketing dollars to a specific channel. That doesn’t give it “immunity”.
Even if you plan down to the finest detail and data point, the fact is, once you unleash a campaign, there is often an element of surprise. The most well-planned and well-intentioned campaign can be a total flop. And a particular ad can go unexpectedly viral, bringing results you never dreamed of.
The only way to cope with unforeseen results is to always test your performance for each channel – the estimation and assumptions compared to its contribution to the business. Some factors you should be measuring to get the best picture of your actual performance include CPA (Cost Per Acquisition) and LTV (Lifetime Value).
It’s best to evaluate these metrics according to various time frames; in some cases, it can take a relatively long time to estimate their true value. At Outbrain, the time frames we use to estimate a channel’s success are weekly, monthly, 3, 6, 9 and 12 months.
In our growth hacking activities, we’ve seen numerous examples of great CPA metrics coming from one channel that later translated into poor LTV numbers. On the other hand, we’ve seen some relatively high CPA native ad campaigns that turned into high LTV customers. So, we always keep in mind that the CAC /CPA is only one part of the equation.
Remember, when taking LTV into account, you typically need a longer time frame (i.e. 3/6/9/12-month perspective).
Your Marketing Budget: A Play of Contrasts
When it comes to planning a marketing budget, you’re working with opposing forces, so it’s important to keep laser-focused on your goals.
Set a strict annual budget, but remain flexible monthly. Focus on getting your marketing goals watertight, yet take a broader perspective that includes the entire company strategy. Examine your short-term results, while considering your longer-term metrics.
If you’re feeling as if you are being pulled in opposite directions, don’t worry – that’s a natural part of planning a marketing budget. Stick to the steps outlined above to keep moving toward your goals.
