In the era of technology 4.0, Digital marketing is an important marketing strategy for many businesses in increasing the number of potential customers, boosting sales, and building brands. However, not all companies know how to implement Digital marketing and achieve business goals effectively. Especially, calculating the budget for the Digital Marketing plan to achieve maximum revenue and profit. In this article, let’s explore this issue more deeply with Optimal FB Agency!
What is a Digital marketing plan?
It is an important document for businesses that outlines strategies and guides the steps to achieve communication goals on digital platforms. It can also be understood as a digital marketing plan, a process, and necessary documents for businesses to be able to carry out communication activities and promote products and services on the Internet.
By planning Digital Marketing, businesses will know how to convey the benefits and outstanding advantages of products and services. The plan must ensure attracting customers, highlighting unique selling points, and providing an engaging experience for customers. It applies to digital channels such as search engines, paid advertising, websites, SEO, Email marketing, etc.
A good Digital Marketing plan must help businesses achieve goals such as reaching and interacting with customers, boosting sales, enhancing brand awareness, increasing loyalty, etc. When building a plan, businesses need to coordinate smoothly between departments and apply all marketing channels to achieve results. If the plan is not clear about the goals or communication channels, it will be a waste of budget. In addition, please see more information about: How much do companies spend on advertising each month?
How much should a digital marketing budget be?
For Digital Marketing, the budget helps marketers determine the amount of money allocated to marketing ideas. Budgeting helps track costs and revenue to determine the ROI of your strategies. Because Digital Marketing is always changing, it is important to set a budget that is flexible with market fluctuations.
When calculating the budget for a Digital Marketing plan, there are several influencing factors you need to consider. These include customers, business size, goals, and development stage. First, you need to consider the business to ensure that the amount of money spent is suitable for the budget but still ensures enough competitiveness with competitors.
If your business has a large scale and financial resources, you will likely spend a lot of revenue on advertising budget. If you are a new or long-established business, you can spend your advertising budget differently. Especially businesses that are in the expansion and development stage will prioritize investing a lot of budget in advertising to increase brand awareness.
However, a general rule that most businesses use is to spend about 7 – 10% of total revenue on marketing activities. Of that, half will be spent on digital marketing activities. This number varies depending on the size of the business and the level of competition in the industry. You need to ensure to adjust your marketing budget to achieve the most important goals.
On the other hand, you can apply the 70-20-10 rule to allocate your advertising budget more effectively. Of these, 70% should be spent on advertising strategies that you find effective for your business. Next, 20% should be spent on new strategies and 10% should be spent on testing new technologies or emerging strategies to improve your competitive position.
While planning your digital marketing budget, you need to identify all the necessary costs. Each business will have its unique characteristics, so there will be no one-size-fits-all approach. Factors you need to consider include business sector, business size, location, etc.
How to calculate your Digital marketing plan budget
To calculate the budget for a Digital marketing plan most accurately, you need to apply the following instructions:
Consider revenue and new customer targets
If you want to determine the appropriate digital marketing budget, you need to set clear goals for revenue growth and attracting new customers. For long-established businesses, it is possible to determine expected revenue based on historical performance and annual growth targets. For new businesses, this number will become more difficult. To answer the question of how much it costs to get a customer, you need to determine the cost per potential customer and the conversion rate.
Determine your overall budget
The amount you allocate to your digital marketing budget will depend on your business size, industry, and revenue. A general rule of thumb is to spend 3-5% of your total marketing budget on digital marketing. However, this is a rough estimate and can vary depending on your goals, business size, target audience, etc.
Calculate your average cost per lead (CPL)
CPL is a measure of how much digital marketing spend you put into acquiring new leads. It is a measure of how effective your marketing efforts are. To find your CPL, divide your total marketing spend by the number of leads generated. Your ideal CPL depends on your industry and business size.
If you want to set a digital marketing budget, you need to calculate your CPL to get an idea of how well you are doing at generating leads. When you collect CPL data, you can evaluate the effectiveness of your digital channels. At the same time, you can determine which marketing efforts are delivering the best ROI.
Calculating the average conversion rate
You can easily generate leads through digital marketing activities to convert them into paying customers. Conversion rate is an important metric that helps you get closer to your business goals. The conversion rate formula is the number of sales divided by the number of leads generated.
You can also use this same equation to calculate the conversion rate for each marketing channel you use, similar to the cost per lead. Once you know how much it costs to acquire a new lead and how many leads become customers, you can know your digital marketing budget.
Choosing the right digital marketing channel
There are many different digital marketing channels, and each has its strengths and weaknesses. Some popular channels include pay-per-click (PPC), SEO, email marketing, content marketing, affiliate marketing, and social media marketing. Based on your audience, goals, and budget, choose the right marketing channel.
Estimating costs and allocating budget for each channel
Once you have selected the channels you will use, estimate the costs for them. This includes researching pricing models, understanding advertising costs, and considering additional costs. Once you have estimated the costs for each channel, allocate your budget accordingly. Prioritize the channels with the highest ROI and set aside a portion of your budget for testing.
Monitoring, measuring, and adjusting
When implementing digital marketing campaigns, you need to regularly monitor and measure results to see which channels are performing well and which channels need improvement. You can use analytics tools to track website traffic, lead generation, and sales data. Additionally, you need to review your Digital marketing budget regularly and reallocate it appropriately to different channels or strategies.
Creating a budget-friendly digital marketing plan is essential to optimize the effectiveness of your marketing efforts. Apply the budget calculation method for Digital marketing that we shared above to reach the right target audience, improve marketing effectiveness, and optimize costs.
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Frequently asked questions
Based on many tests, it shows that you should spend 7 – 10% of total revenue on marketing activities. From this number, you should spend about 3 – 5% on digital marketing activities. Once you know which strategies to implement, you need to allocate money for each strategy. You can apply the 70-20-10 rule to allocate advertising budget more effectively. Of these, 70% should be spent on advertising strategies that you find effective for your business. 20% should be spent on new strategies and 10% should be spent on testing new technology or emerging strategies to improve your competitive position.
If you want to manage the budget for your Digital marketing plan, you first need to review the company’s overall business goals. When creating a marketing plan, you need to define your brand, and product positioning and target customers in line with your overall business strategy. This ensures that your marketing activities are as effective as possible. You also need to check what your marketing spending is for. Once you have set up your campaign, you need to measure the results and make appropriate adjustments.
