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How much should small businesses budget for digital marketing?

Updated: Apr 1, 2020

I will outline 5 simple steps that will help you build your own digital plan, finally a little maths to demonstrate how marketing budgets for small businesses can be used and what outcomes you could expect.

5 steps that will help you start taking back digital control

This is how you can make every penny spent online marketing worth it!! and avoid feeling like you just lost a fortune in an online casino disguised as Google.

Step 1: Decide on your platform strategy, this should combine social media channels and online marketing. Common social media channels are FacebookTm, TwitterTm, InstagramTm, PintrestTm and online marketing including Search Engine Optimisation (SEO), Pay Per Click normally starts with Google(Tm) and Youtube(Tm). This is a great article to read for more platform strategy 

Step 2: Identify your ‘keywords’ these are normally the first nouns that come to mind when describing your business, let's use 'FISH AND CHIP SHOP IN NOTTINGHAM'. Keywords can be very competitive so the more descriptive the keywords the more likely you are to be ranked higher in the returning search results. 'ALE BATTERED COD AND CHUNKY CHIPS IN BEESTON' try using the same principle with your best selling product line. Online customers know what they want, and if you're able to target their needs with specific keywords your half way to a sale.

Step 3: Get to know your customer, this can take a few attempts of running campaigns with  A/B testing to get the right targeting perimeters. Let me explain, social media /online platforms allow you to narrow down your target audience, some by demographics such as age, location, interests and much more. In the beginning create multiple smaller campaigns with highly targets demographics; after a period of run time you can cancel the underperforming projects, and tweak the better ones until you have responsive campaign groups, delivering good results. By using multiple smaller campaigns, you are avoiding failures associated with a shotgun approach; it's better to think like a snipper with online marketing. 

Step 4: 'Content is king' and changing styles can play an informative role in your A/B Testing, maybe you have correctly identified who your customers/clients are, but your still getting low click through rates.... in this case you need to revaluate the 'relevance' of the content you're sending out. Digital platforms are unique in structure and over the years research suggests colours, voices, text styles, video durations all play a key role in achieving high content impressions figures.  FacebookTm is being found to be less effect for long videos with people preferring shorter clips. Instagram is known for pictures and videos whilst twitter is balanced towards short text style messages. (more details around Digital platforms). Content therefore goes past expecting a beautifully made funny video to instantly go viral but rather requires connecting multiple strategic digital dots.

Step 5: Give yourself enough time to succeed online as it works in a manner similar to the snowball effect, once momentum is achieved the effort vrs results ratio starts to balance off in your favour. It ‘can’ take 4-6 months to gain a half decent search engine ranking but that doesn’t mean you sit back and wait. In the meantime, you can run paid advertising campaigns, employe influencers, collect customer reviews and create captivating content. Spend a minimum few hours a week to review your analytics, check out the competition and like, comment, follow, share other people's content.     

Basic maths behind your digital marketing budget. 

How much would you normally spend on advertising?

Averagely it's between 2-4% of your yearly revenue. At this point.. some small business owners explaining to me with pride, how they have only ever use 'word of mouth' for promotion.....

This marketing strategy scares me, more so in today's world; Why? I hear you ask.. well in a couple of clicks most people can be online, with access to 10's or 100's of reviews and recommendations, listing the best places i.e. to fix my car, or which plumber is best in my area, where can I buy birthday cakes.. the good old days of calling up a buddy, family member or asking a local for advice are far behind.

Below is an example of even how the tightest budgets can be used...

So, let's assume your just setting up a one year campaign and can afford to set aside 3% of your revenue.

Your predicted yearly revenue is £500,000.

At this rate your looking to spend £15,000 / year on marketing.

What this will get you in the digital world?

1) A consultant is likely to manage an entry level marketing campaign for a fee of £6,000+ /year within this fee consultants are expected to provide you with a organic strategy, optimise a couple digital accounts and provide ideas for content and copy. HINT: Be sure to shop around to get the best packages but, don't necessarily go for the cheapest!

2) Now let's look at the remaining £6,000 and what you could achieve with paid advertising.

(As mentioned above a campaign should deal with a mixture of platforms but for the purpose of simplicity this example uses GoogleTm Ads. These figures are only a guide and can differ slightly for each business and its specific targeting)

Up-to 40,000 impressions / month

Producing160 - 260 clicks throughs to your website / month

10% of the clicks will convert into sales = 312 sales/customers / year

Not bad!, imagine each sale was a car, house or mobile phone or if you're in the cake business and each new customer returns daily or weekly over a year. 

3) If your business relay's on a salesforce or a door to door leaflet dropping strategy you may want to reconsider the costs associated to these functions and the value they are returning into your bottom line; as an extra £30,000 / year into your digital budget as you can see from the above single platform strategy could really take your business to the next level.

To Conclude

Only spend what you can afford on digital marketing and I recommend to create a minimum budget for a period of 6 month - 1year. A shorter period would be counterproductive and difficult to achieve return on expectations.

Digital marketing leaves a data trail and as software's advances it is becoming easier to connect platforms together providing you with an ecosystem of data. With a little practice you will soon become familiar with the charts and tables, phases and terms enabling you to track performance vs. expenditure. This hands down beats wondering if people actually read your flyers, or hear your radio adverts or even take notice of your very expensive TV ads.

I do recommend working with a digital consultancy that understands the full scope of your business needs and has experience in running effective campaigns. This will save your business massive amounts of money in mistakes, up-training of your existing internal marketing personal and free your time to focus on servicing the influx of new customers.

If you are, working on a limited budget, sticking to my 5 steps above will ease you into building a targeted campaign strategy, with historical performance data related uniquely to your business providing you a foundation to budget with more confidence year after year.

Written by: Joseph Nelson-Cofie

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