The fourth quarter of the fiscal year typically means planning your budget for next year. The marketing strategy and budget play a major role in the planning process. Does your current budget support what is needed for an effective digital marketing strategy?
How much should I allocate to a marketing budget?
It’s a good question and the answer is…it depends. Is your company in a growth stage? Are you releasing a new product, entering new markets or facing increasing competition? If any of these apply to you, then your marketing budget may be higher than if you are an established company on a steady growth trajectory. Another factor is whether you are a B2B, B2C or a combination of both.
A 2016 survey of Chief Marketing Officers found the average marketing budget to be 8 percent of the overall budget. We suggest as a general rule of thumb, that companies should be investing at least 8 to 10 percent of revenue to their marketing. Ultimately, your budget should reflect what your company can afford in relation to how much you want to grow.
What are the essential parts of the marketing budget that I should know when planning for the next year?
Depending upon your audience, your marketing mix may include a combination of traditional marketing (print advertising, direct mail, trade shows, etc.) and digital marketing. Trends over the past few years show companies shifting more of their marketing budget from traditional channels to online marketing including investing in their websites and social media.
In 2017, more than 80 percent of companies increased their digital marketing budget, so if your current plan doesn’t include a solid dose of digital, then you are missing a very important piece. If you are like most companies, generating new leads and web traffic is your top marketing challenge. In which case, allocating a significant portion of your budget to digital marketing is going to be important.
How do I know what to spend in digital marketing?
Digital marketing is becoming a more substantial portion of the overall marketing budget with an average of 35 percent of dedicated marketing funds. Digital marketing includes web, SEO, video, email marketing, advertising on social channels, content marketing and more. In 2016, B2C marketers allocated 32 percent of their budgets to content marketing. Like the rest of your marketing plan, a digital strategy will include a combination of activities that all work together.
One thing to note is that digital marketing talent will be a key component to the success of your digital strategy. As your plans expand, your marketing talent headcount will need to scale accordingly.
Should I hire digital strategists, or should I use a marketing agency?
Hiring and growing an in-house marketing team has some obvious benefits in that you have a team with expertise in both marketing and knowledge about your company, products and the industry. One of the biggest challenges that companies face is the digital marketing skills gap where marketers are unable to demonstrate expertise in all facets of digital marketing. In a recent study, business leaders noted that digital marketing talent is difficult to hire and retain. In addition to this, many small to mid-size companies don’t have the luxury of having a large dedicated digital team, so this staff is often directed to other internal company marketing initiatives.
In a recent article, we talked about the value that hiring an outside agency brings. A digital marketing agency has skilled experts with up to date knowledge of technology, trends and the resources to implement a strategy. They also have the benefit of tried and tested tactics with other clients where they have been successful that can be applied to your business. An agency earns a positive reputation when they can show results, so it’s in their best interest to carefully measure and adjust strategy to get the highest results for their clients. In addition, digital agencies have other services such as web development, creative content, branding and more to offer as part of their overall offering. For the cost of one internal marketing employee, a company can redirect that money to an agency and benefit from multiple experts.
Show me the money: setting your marketing budget
Setting your marketing strategy and budget is a soul-searching process. It often means letting go of activities that you’ve done year after year, but don’t really produce results, or they are hard to measure. Taking the time to review previous activities will open opportunities to redirect marketing dollars to areas that can deliver a higher ROI.
For example, is the money you are investing in tradeshows and conferences really generating a positive ROI? It isn’t unusual for a company to spend large portions of their budget on trade shows. Granted, some yield qualified leads, offer opportunities to see what the competition is doing and arrange several client meetings. However, many don’t.
Consider this; a 10×10 booth at an industry tradeshow can cost more than $30,000 by the time you pay the expenses of the show, travel and lodging for employees. That amount doesn’t address the time away from the office and the resources needed for weeks of pre-show planning. Webinars, videos and podcasts are great ways to accomplish what you might at a tradeshow and they can be packaged up and used as CTAs in your digital marketing campaigns and posted on your website.
My advice in reallocating budget for a digital agency is to review your past marketing activities and eliminate the lowest-performing tactics to direct that money towards an agency that can develop and deliver an effective plan. If you don’t already have an experienced digital marketer in your company, you should also consider the cost of searching, hiring and training that additional headcount as part of your budget.
If you would like to learn more about working with an agency, contact us and we can talk through your marketing and business objectives for the coming year. Schedule a discovery call to discuss your marketing budget.