How to Create an Affordable Digital Marketing Budget as a Small Business in 2024
Every aspect of running a small business can be incredibly challenging, including creating a budget. Most small businesses are on a very tight budget, so you want to ensure that you distribute it in a way that doesn’t neglect any of your business needs. Depending on your digital marketing experience, it can be even harder to figure out how much to budget for this part of your business expenses.
Whether you need to create your first digital marketing budget or need to adjust your existing one, the following tips will make it much easier.
Importance of Having A Marketing Budget
Establishing a marketing budget is crucial because it acts as a blueprint for your business's growth and visibility in the marketplace. Without a dedicated budget, marketing efforts can become sporadic and inconsistent, leading to missed opportunities and inefficient use of resources. A budget allows for a strategic approach, ensuring that every dollar spent contributes to reaching your target audience and achieving your business goals. It helps in prioritizing different marketing channels and tactics based on what delivers the best return on investment, ensuring that your limited resources are used in the most effective way possible.
The Rule of Thumb by Percentage
Remember that every single company is different, and your digital marketing budget will depend on a long list of factors. That being said, there are some general rules. B2B companies typically spend about 2-5% of their revenue on marketing as a whole. This figure is about 5-10% for B2C companies.
But there are two things to remember when using these general guidelines. First, there are significant variations within the range, and you may not even fit in the range. As such, use the ranges as a general guideline and don’t feel like you have to stick to the figures. Second, those percentages are for all marketing, not just digital marketing.
So, that 2-10% of your revenue will also include any non-digital marketing you do. For example, do you have radio ads, ads at bus stations, print flyers, or in-store advertising? All of those also need to be accounted for.
List All of the Components of Your Marketing Budget
To start figuring out where you fall within the typical range for digital marketing budgets, make a list of all the expenses you have or will have. Be sure to include digital marketing strategies you don’t yet implement but plan on using, such as local influencers. The following are some of the most important potential costs to consider:
- Website Development and Maintenance: Your website is your online storefront. Allocating funds for its design, development, and regular maintenance is crucial. This includes hosting fees, domain renewal, design updates, and ensuring the site is user-friendly and mobile-responsive.
- Content Creation: This involves creating blogs, videos, infographics, and other types of content to engage your audience. Good content helps attract visitors to your site and improves your search engine rankings.
- Search Engine Optimization (SEO): SEO is about making your website more visible in search engine results. Budgeting for SEO means investing in keyword research, content optimization, and improving website structure and speed.
- Social Media Marketing: This includes creating and promoting content on social media platforms like Facebook, Instagram, LinkedIn, etc. You might also allocate funds for social media management tools.
- Online Advertising: This can be pay-per-click (PPC) advertising on search engines, social media advertising, or display ads on other websites. These ads help you reach a larger audience and drive traffic to your website.
- Email Marketing: Budget for email marketing software and resources to create and send newsletters, promotional emails, or automated email campaigns to engage with your customers and leads.
- Analytics and Tools: Investing in analytics tools helps you track the performance of your website and marketing campaigns, understand customer behavior, and make informed decisions.
- Training or Outsourcing: You might need to set aside funds for training yourself and your team in digital marketing skills or for outsourcing certain tasks to specialists or agencies.
For each of these categories, remember to think about all of the associated costs. For example, your website cost is not just to design the website in the first place. There are also hosting fees and domain fees. You will also need website maintenance and potential updates.
Then, you also have website-related advertising costs, such as SEO. If you are going to hire someone to write a blog for your website, you also have those costs.
Take social media as another example. We mentioned both general social media management and paid ads, but you will want to consider more than this. Specifically, think about what social media pages you will need to be present on and allocate a budget for each of them.
Think About Your Customers
Once you have your list of potential expenses, it is time to think about your customer base. As a business owner, asking yourself the right questions from the customer's perspective can greatly inform where you focus your marketing efforts and budget. Here are some questions to consider:
- Who is my ideal customer? Understand their age, location, interests, and lifestyle to tailor your marketing strategy effectively.
- What are my customers' primary needs and challenges? Knowing what problems your customers are trying to solve helps you align your offerings more closely with their needs.
- Where do my customers spend most of their time online? Identifying the platforms they frequent will help you determine where to concentrate your digital marketing efforts.
- What type of content do my customers engage with most? Understanding their content preferences (blogs, videos, social media posts) guides your content creation strategy.
- What are my customers' buying behaviors? Knowing how they make purchasing decisions can help you tailor your marketing messages and tactics.
- What language and tone resonate with my customers? Align your messaging with the way your customers communicate and what appeals to them.
- What feedback have customers given about my business or products? Use customer feedback to improve your offerings and marketing approach.
- How do my competitors appeal to similar customers? Analyzing your competition can reveal gaps in their strategies that you can capitalize on.
- What values and ethics matter to my customers? Aligning your brand with these values can strengthen customer relationships.
- What are the common questions or objections my customers have? Addressing these in your marketing can pre-emptively ease concerns and facilitate the buying process.
- How can my products or services make my customers' lives better? Emphasizing these benefits in your marketing can make your offerings more attractive.
Use those answers to decide how to allocate your budget. You will focus your budget and efforts on the channels and marketing strategies that are most likely to deliver results. Understanding your customer's perspective is key to creating effective marketing strategies that not only reach your audience but also resonate with them, leading to better conversion and customer loyalty.
Set Marketing Goals
Setting clear marketing goals is crucial for effectively allocating your budget, especially as a small business owner. These goals act as guiding stars, helping you decide where to focus your financial resources for the best outcomes. When your goals are specific and measurable, you can align your budget with the strategies most likely to achieve them, ensuring that every dollar spent contributes towards tangible results.
Helps You Focus Your Efforts
If your goal is to increase website traffic by 20% over the next quarter, you can allocate more budget to search engine optimization (SEO) and online advertising. This targeted spending ensures that your efforts are not just scatter-shot but are instead focused on what will move the needle for your specific goal. Similarly, if your goal is to boost customer engagement, your budget might be more heavily invested in social media marketing and creating engaging content, rather than in broad-based advertising.
Helps Prioritize Spending
Marketing goals help in prioritizing spending. It's easy to get overwhelmed by the vast array of marketing options available, but not all of them will be equally effective for your business. By setting goals, you can identify which channels and tactics have the highest potential for impact and allocate your budget accordingly. This targeted approach not only makes your marketing efforts more efficient but also more cost-effective.
Helps Measure Success Accurately
Having clear goals allows you to measure the success of your marketing initiatives accurately. By tracking your progress towards these goals, you can understand which strategies are working and which aren’t, enabling you to adjust your budget allocation in real time. This adaptability ensures that your marketing budget is always being used in the most effective way possible, maximizing your return on investment and driving your business towards its growth objectives.
Consider What Tools to Use, Including Free Ones
Most small businesses will want to keep their digital marketing budget as low as possible. Luckily, there are many free tools that can help with this. Google AdWords Keyword Planner is one great example. Just remember that paid tools will give you more resources and features than free ones; however, your business may not need those extras.
This is also the time to figure out what you will do in-house and what you will outsource. Remember that doing your digital marketing in-house is not always cheaper, as you will have a learning curve and spend time that you could’ve spent on something else. You may also get a lower ROI. As such, you need to carefully evaluate the pros and cons before deciding whether to outsource specific marketing efforts.
Track the Budget and Results and Adjust as Needed
As with any other aspect of running your small business, don’t force yourself to stick to a marketing budget long-term once you establish it. Instead, make it a point to regularly evaluate your digital marketing results and your expenditure. Compare your results to baseline figures from before you implemented your new strategies.
If you see results but they aren’t enough to let you reach your goal, consider increasing your budget. If you surpass your goals, see if you can reduce your budget. Or if you aren’t seeing results, temporarily reduce your marketing budget while you figure out what works best.
Conclusion
Most B2B businesses spend between 2 and 5% of their total revenue on marketing, and B2C businesses usually spend 5-10%. Use those figures as a starting point, but consider your goals and potential costs. Most importantly, regularly evaluate your marketing efforts and results, changing your budget as needed.
