It’s not unusual for the business owners and executives we meet with to admit they struggle to set appropriate online marketing budgets. It isn’t that they don’t put thought into their expenditures, just that it can be difficult to know how much money to put towards finding new customers on the web – and how those dollars should be spent – if you aren’t a marketing expert and/or haven’t gotten promising results in the past.
Think about the conundrum that owners and executives face when trying to put numbers on the amounts they’ll contribute to SEO, social media, and other activities. If they set aside too little, they might not generate enough traction to see real, sustained bottom line results in the form of new business. If they budget too much, though, it could represent a big gamble or negatively impact other parts of the company. The money could be wasted or cause unexpected difficulties.
Things are made worse by the fact that businesspeople can’t always get good advice on developing online marketing budgets. It’s unfortunate but asking the wrong web designer how much you should spend on the web is a good way to get overcharged for services and packages you don’t need.
So, how much money should you be spending on internet marketing and where should those dollars be going? With the obvious caveat that every client, company, and situation are different, here are some good rules of thumb you can follow…
Start in the Sweet Spot
The sweet spot in online marketing just represents an amount you feel comfortable spending and that also covers the basics of what you need (including things like reliable web hosting, basic pay-per-click ads, etc.)
To put it a different way, this amount is likely to be more than you would spend on lunch for your staff, but less than you would burn if you had to make a major upgrade, improvement, or investment in your company. It’s a dollar figure that represents a serious commitment to finding customers online but won’t cripple you if it takes a few months to generate positive returns.
Don’t overlook the point we just made. The sweet spot in your online marketing budget has to be enough to get you going but not make you worry about the immediate results and ROI that will be generated. You always want to get positive returns from your campaigns, of course, but you don’t want to make bad decisions because you are rushing things.
We have seen far too many clients give up on things like search engine optimization too soon because they were worried about costs. It’s much better to spend a little less in the beginning if that’s going to help you sustain your momentum over time, particularly when you need to make adjustments and course corrections.
As we mentioned, this figure will be a little different for every business and situation, but most new clients come to us having a good idea of their sweet spot range.
Build on Your Successes
It might sound overly simplistic to say you need to keep contributing to successful campaigns, but some business owners and executives – excited to see more cash flowing into their bank accounts – will actually make the mistake of decreasing their online marketing budgets after they start earning a positive return. It makes sense to pull some of your profits, of course, but be sure to reinvest some of your new revenue back into the business so your gains can multiply over time.
Once you know why it’s a good idea to keep some time and money flowing into new business development, the question becomes: where to spend it? You could follow a hunch, but it’s much better to keep a close eye on web metrics and conversion statistics and let them be your guide.
It’s crucial that you get together with your web design companyto study the numbers from your website (and especially things like visits and conversions) because they’ll tell you how future budgets should be directed. You’ll be following an analytics-based approach to spending that yields better long-term performance, just as you would with any other money you are spending on stocks, real estate, or business improvements.
As a rule of thumb, we like to advise clients to put 80% of their online marketing expenditures into the biggest winners in their campaigns. So if search engine optimization is paying off in a big way, for example, that’s where the majority of your new dollars should go.
Experiment with New Ideas
What about the other 20% of your online marketing budget? That can be used to experiment with new ideas, campaigns, and tools. For instance, you might expand your efforts to include social advertising, or make remarketing more of a focus.
If you follow this approach, a couple of things will happen gradually and naturally. The first is that your online marketing campaigns will get bigger and more profitable as you keep trying new ideas. The second is that your budgets will probably increase overall because you can see real results from the money you’re spending.
All of us like safety, guarantees, and the feeling of comfort. Those tendencies, and simple habits, can all persuade us to fall into routines where we simply keep doing what we’ve done in the past. It makes sense to double down on winning techniques, especially if sales are growing.
While that’s always a good idea when you’re first starting out, it can actually hold you back as your online marketing campaigns move ahead. Things are always changing on the internet and you want to be ahead of the curve rather than trying to catch up to your competitors. By using some small percentage of your online marketing budget (perhaps 10% or 20%) to experiment, you can be the first in your market or industry to figure out what buyers are responding to.
It’s easy for success to go stale if you get too comfortable, so stay on the lookout for fresh plans and concepts.