For a firm to succeed in the modern world, digital marketing is crucial. In 2020, Americans spend 470 minutes a day on average consuming digital media. By 2022, that time had increased to 489 minutes, and by 2023, it was projected to surpass 500 minutes. Businesses are embracing this change and adapting to the challenge, and analysts project that by 2025, spending on internet advertising will surpass the $200 billion USD mark.

These figures show unequivocally that digital marketing is now considered standard practice in the business world. Instead of determining whether digital marketing is appropriate for your business, we’ll focus on key budget allocation techniques.

According to several experts, you should spend between 5 and 15% of your revenue on marketing, with 10 to 50% of that money going toward digital. But if that still seems like a very wide range, we will discuss some steps to help you get more specific and figure out a budget for your company’s digital marketing.

• How Should I Allocate my Marketing Budget?
• How do you Allocate a Digital Marketing Budget?
• How to Allocate Their Marketing Communication Budgets for Both Traditional and Digital Media?
• What is the 70 20 10 Rule Marketing?

How Should I Allocate my Marketing Budget?

It’s useful to know how much money you have to spend overall before deciding how to allocate your market budget.

Your goals and available funds will determine how much money you have to spend on marketing. Typically, businesses dedicate 7–10% of their total revenue to marketing. Spending more might be up to 20% if you’re a new business or want to concentrate heavily on rapid growth.

Read Also: What are the Activities Included in 4e Framework for Digital Marketing?

Of course, these are simply average ranges, so depending on your demands, you might choose to spend more or less. Do not spend money that you cannot afford to lose when developing your marketing budget strategy. This guideline will prevent you from overspending.

1. Set marketing goals

Making a marketing budget plan requires you to first determine your marketing objectives. Which channels and techniques you utilize, as well as how much money you allocate to them, will be influenced by your aims. Make your marketing objectives SMART, which stands for:

• Specific: Include details in your goals and avoid vagueness.
• Measurable: Ensure you can measure your progress toward your goals.
• Attainable: Your goals can be ambitious, but they should also be realistically achievable.
• Relevant: Your marketing goals should be relevant to your overall business objectives.
• Time-bound: Set a time limit for achieving your goals to help keep you on track.

2. Create a plan for the year

Make a preliminary plan for your marketing for the year to help further direct your marketing budget allocation. As you develop your plan, don’t forget to keep your marketing objectives top of mind. Think about your customers’ interactions with your marketing and how they progress from discovering your company to becoming devoted clients.

You must also consider how you will apply these strategies. Will you use freelancers, a marketing agency, or your in-house marketing staff to do the task?

You might combine a few of these techniques. The 70-20-10 guideline is a helpful guide to remember when selecting marketing channels. This policy states that:

• 70% of your budget should go towards strategies you know work well
• 20% should go to new strategies that help your business grow
• 10% of your budget should go towards emerging or experimental strategies to keep you ahead of the competition

3. Calculate expected costs and return on investment (ROI)

Next, determine the projected costs and potential ROI for each marketing activity. A rough estimate might help you decide how to divide your marketing budget, even though you, of course, don’t know exactly what your ROI will be. Be cautious to include all of your prospective costs, even the less obvious ones, when calculating your costs.

Calculating your marketing ROI can be challenging, but you can start by looking at industry benchmarks for the channels you’re employing. According to research from 2018, the typical conversion rate for Google Ads on mobile search is 3.48% across all industries.

However, averages differ per industry. The average conversion rate for the tourism and hospitality industry is 2.4%, but the average for hair salons is 5.95%. Examining your previous campaigns’ ROI and the track record of the firm you’re working with is beneficial.

Making an estimate of your expenses ensures that you distribute enough funds to each channel. You may gauge the value of your investments in each channel by estimating your ROI. You might wish to put more money into high-ROI approaches.

4. Allocate your spending

You can now divide your expenditure among the channels you’ll employ based on the data you’ve gathered. Keep in mind your objectives, anticipated expenses, anticipated returns on investment, and best practices for allocating your marketing budget. Let’s examine a simplification of how a business might allocate its marketing money.

Let’s say your monthly marketing budget is $12,000 dollars. You want to boost your conversion rate and deliver more highly qualified leads to your website because it now receives a respectable level of traffic from search engines.

You might create your own blog entries and handle your own social media to save money. You might switch some of your PPC money to SEO and content marketing later in the year if you see competitors overtaking you in search engine rankings.

5. Track your campaigns and refine your strategy

Keep close tabs on your key performance indicators as your campaigns are in progress to gauge their effectiveness. The results can then be used to improve how your marketing money is allocated. If a campaign is doing particularly well, you might decide to give it more money.

If a campaign isn’t having the desired results, consider whether you need to change your strategy or spend less money to it. Don’t abruptly stop sponsoring a channel that is crucial to reaching your objectives. Compile your campaign and ROI statistics and apply it when preparing your marketing budget for the following year, in addition to modifying your spending as you go.

How do you Allocate a Digital Marketing Budget?

The proper combination of digital marketing budget allocation tactics must be planned as digital marketing gains momentum. It would be like trying to aim an axe in total darkness if you didn’t have a budget for digital marketing. It amounts to a waste of resources in our era of digital marketing, including time, money, and effort.

It is a predetermined sum that a business reserves exclusively for digital marketing initiatives like SEO, PPC, social media marketing, website development, etc. The question that now emerges is: Why is it vital to budget for digital marketing activities?

A digital marketing budget actually has numerous uses, but it mostly aids in giving you focus and allowing you to monitor your sharing efforts.

Here is a comprehensive method for creating a digital marketing budget that can regularly raise awareness, provide leads, and achieve sales targets.

Avoids overspending and underspending

Spending on digital marketing is it too high? Yes is the clear-cut response. In the United States, digital media already receives $6 of every $10 spent on it. Ineffective methods or channels squander an average of 26% of marketing costs, according to a study by eMarkters. A marketing budget is similar to a yardstick that makes it simple to assess their return on investment and organize your marketing expenditures.

Brings clarity to the allocation of funds

Digital advertising is complex. SEO, content marketing, social media marketing, sponsored marketing, and many other strategies are available. Your budget allocations throughout the various channels will become crystal evident after you budget for these digital marketing initiatives. If, for example, Facebook offers a larger return on investment than Google Ads, you can simply direct more resources to the channel that generates the most profit.

Gives you a clear picture of the return on investment

You will consider the most recent marketing trends when establishing a budget for digital marketing efforts. You’ll be able to acquire customers and get the desired return on investment by doing this.

Sustain your business growth and profitability

A competent marketer is aware that a marketing budget is an efficient investment in the expansion of their company rather than merely a cost. Spending money on your digital marketing efforts can help you use your resources wisely and provide the best possible outcomes.

The 70-20-10 budgeting rule

It is often tempting to continue using the tried-and-true budgeting techniques that have brought in money in the past. However, the situation is different in digital marketing. Regardless of your business, you should spend 70% of your annual marketing budget on tried-and-true digital marketing techniques that have historically produced positive outcomes, such search engine optimization and affiliate marketing for merchants.

Any action falling within this category ought to be a success. Additionally, 20% of the annual digital marketing budget should go toward initiatives that are brand-new for your company but are automated and result-driven in nature.

Investing in innovation will help your firm prosper and expand. You should be responsive, flexible, and more adventurous with the remaining 10% of your marketing spend. To keep ahead of the competition, only 10% of effort and resources should be devoted to advancing technology and tactics.

Profit-focused budgeting

This is another efficient budgeting method that primarily concentrates on your marketing initiatives for the campaigns that provide the highest revenue. Your marketing budget should emphasize two things as you use this strategy: the kind of marketing campaign you’ll run and how profitable it will be for your company.

By providing some basic information in the following table, you can obtain more insightful information.

Campaign	Method	Number of leads	Cost per leads	Budget needed	Months to mature	Average annual profit per lead (Rs. 100)	Customer lifetime value (Rs. 500)
Google Ads	Foundation	100	Rs. 70	Rs. 7,000	1	Rs. 3,000	Rs. 53,000
SEO	Foundation	100	Rs. 35	Rs. 3,500	6	Rs. 6,500	Rs. 56,500
Social Media	Supplemental	N/A	unknown	Rs. 500	3	Rs. 0 assumed	Rs. 0 assumed
Content marketing	Supplemental	N/A	unknown	Rs. 500	3	Rs. 0 assumed	Rs. 0 assumed

The following insights are provided by this marketing budget:

• Which campaigns you are investing in
• Which campaigns are profitable amongst foundational and supplemental methods
• How many leads do you need from each campaign to earn profits
• Whether or not you should increase your budget
• How long each campaign takes to mature

The what’s in my wallet approach, goal-and-task methods, percentage methods, and more budgeting strategies are available in addition to these two widely used ones. Depending on the activities you have planned for the campaign, you can also modify your budgeting strategies.

How to Allocate Their Marketing Communication Budgets for Both Traditional and Digital Media?

The possibilities available to your business are expanding daily, and even if 2020 and 2021 proved that digital marketing is the way of the future, traditional marketing shouldn’t be ignored. You can purchase sponsorships, direct mail, billboards, commercials, and more with traditional marketing spending. You can spend money on SEO, Search Ads, Facebook Ads, Instagram Ads, Email Marketing, and other forms of digital marketing.

We’ll go over 8 stages to get you started on a more sensible plan for allocating your marketing budget.

1. Keep your current marketing budget in mind, but don’t cling to it.

You are aware that not all marketing channels are the same in terms of cost and efficiency. But if you’re anything like me, choosing a monthly budget and figuring out how to stick to it is reassuring. Unfortunately, a straightforward budget reallocation could result in missed opportunities.

Therefore, when you do the next tasks, have an open mind. It will assist you in selecting a general marketing budget that fits your needs and helps you reach your objectives.

2. Audit your monthly marketing practices.

What advertising techniques do you employ each month? Make sure to research and keep track of all the channels you currently use to promote your company. Investigate and record (using an Excel spreadsheet should work nicely) the cost, the traits and population you hope to achieve, and the amount of time required for management, if you’re handling it internally.

After making a quick list, if you feel that something is missing, inquire with everyone else in your firm regarding marketing initiatives. How much time does your administrative assistant actually spend each week promoting your company on Facebook? How many flyers are actually being mailed? How many actual physical or online events do your salesmen attend?

As soon as you’ve created a map of your state of marketing, try to estimate the number of leads that each channel has generated for your business. Of course, leads may not always translate into sales. That’s what the following action will be. People who actively (inbound leads) or unintentionally (outbound leads) come into contact with your marketing materials are referred to as leads.

A word about websites: while they are unquestionably marketing tools, picture your website as a second lobby for your leads after you’ve aroused their curiosity. If you’ve installed Google Analytics on your website, you may use it to estimate how many leads your marketing campaigns are generating. We hope your marketing reporting procedures are sound.

3. Calculate your lead to conversion rate as well as you can.

Count the number of conversions (sales) your business has experienced each month and compare it to the number of leads you think your marketing efforts led to. You’ll get a general notion of your lead to conversion rate from here.

Determining ROI has typically been difficult for traditional marketing. How many readers of the free magazine actually read that advertisement? How many of those people seriously considered using your services but didn’t end up doing so?

Even if you are seeing a return on your investment from your traditional marketing efforts, organic and paid digital marketing is far simpler to measure than traditional marketing methods.

As a result, you can be sure that no matter how much money you end up spending on digital marketing, successive audits should provide you with enough data to help you focus your efforts even more.

In order to compare and keep it in mind going ahead, be sure to look up the average conversion rates for your industry.

4. Think about leads.

There are typically two types of leads in the world of marketing today: those that approach you (inbound) and those you politely accost as they watch TV or listen to the radio (outbound).

Inbound leads are much more likely to make a purchase than outbound leads, as one might anticipate. However, conventional marketing strategies are typically (though not necessarily) expensive and outbound in character. On what types of leads are you focusing your marketing efforts?

Digital marketing has occasionally created a new channel for outbound advertising, but it works especially well for inbound advertising! Being where a potential consumer might be seeking for something connected to what your business can provide is at the heart of inbound marketing.

In the digital era, those places overwhelmingly include:

• Internet Searches (1st Page of Results)
• Social Media
• Your Website and Blog
• Email Subscriptions

Changing your budget in favor of digital marketing with a focus on generating those inbound leads could do your company the world of good if the conversion rate you estimated in Step 3 is really low.

5. Choose channels for max marketing ROI.

There may be several ways to reframe your marketing tactics and plan. As a shrewd businessperson or businessman, you are aware that there is no surefire recipe for success, but you now have useful information you can apply to take your marketing to the next level.

What action do you believe T-Co. chose to take? T-Co’s average kit costs $2,000, so achieving a monthly sales target of 175 would allow them to pursue the mailer and social media marketing campaigns (for which they would need to spend $24,500, or 7% of their gross revenue), but the video series and inbound leads would be out of their reach, and it would also put a strain on their finances in the short term.

T-Co. opted to invest fully in the Social Media Marketing campaign and just marginally enhance the circulation of their current mailers after reviewing their alternatives with the marketing firm and as a team. They also made the decision to buy the video series, but they also made the choice to spread out the filming and payments over a six-month period.

Read Also: What is Dynamic Digital Advertising?

Using a new lead capture form on their website, T-Co. and Wendy will be able to collect information from website visitors interested in staying in touch, further capitalizing on the excellent ongoing relationship T-Co. has with builders and homeowners alike. Their efforts will help both in the short term, generating awareness, and the long term.

8. Track ROI, rinse, and repeat!

Track your leads, sales, and cost per sale as you carry out your plan. To develop a complete picture, you and your marketing supplier will probably need to collaborate closely. In particular, you’ll be able to evaluate what’s effective in the areas where you are generating the most inbound leads over time. After that, you can change as necessary to further optimize your marketing initiatives and make the most of your work, whether it’s old school, new school, or a hybrid of the two.

What is the 70 20 10 Rule Marketing?

What kinds of content should a brand post on social media is a perennial conundrum. The 70:20:10 rule enables you to organize your updates in a way that makes your business seem credible and concurrently engages the reader.

This overview was just published by Western-Webs:

• 70% of Facebook posts should be proven content that supports building your brand
• 20% should be content from others, such as promoting another’s business or sharing interesting articles written by another and tagging
• 10% should be call-to-action in nature such as sales, discounts, introduction on new offerings, etc

This is the kind of posting mix that we try to use on various social media platforms, not just Facebook. Although some might contend that you should share more than 20% of other people’s content, many social feeds are overly commercial.

As you can see, the 70:20:10 marketing rule is flexible in and of itself. Its attractiveness is that it may be used for various elements of time and resource budgeting. It’s more of a starting point for conversation than a rigid guideline. In conclusion, if marketers concentrate the majority of their efforts on upholding (or even creating) their brand, they can spend the remainder of their marketing efforts to making sure they emotionally connect with consumers.

You can risk some of the remaining funds on possible areas of growth that could turn out to be very profitable in the years to come by concentrating a sizable portion of your marketing budget on areas of proven success.