Strategy and Budgeting

Digital Marketing - Study Notes:

The elements of budgeting

You have to cost your digital marketing campaigns, and this is why budgeting is such an important part of your strategy. Without a careful budget, costs could spiral out of control, eating into your return on investment (or ROI).

Budgets are made up of media costs, creative production, agency fees, and the digital tools and technology needed to deliver the campaign or strategy. Additionally, staff costs, training, and processes can be included as part of the overall budget. And you always should leave in buffer money, or emergency funds, for unexpected expenses or sudden increases in costs.

Budget considerations

What are the key considerations for budgeting?

• Objectives
• Reach and value of audience
• Budget available, and priorities
• Ad spend allocation
• Under-Investing

We’ll now explore each a bit further.

Objectives

Budget setting for channels and formats is linked to your objectives. In other words, you should allocate more budget to those channels that will efficiently and effectively deliver on your digital marketing objectives.

But how can you predict which channels are most likely to deliver your objectives?

• It’s possible to forecast channel performance by using historical performance as a benchmark for future campaigns.
• Using historical conversion rates, you can estimate how much traffic you need at that conversion rate to deliver a certain number of sales or leads.
• With paid media, you can estimate the cost of that traffic by using historical CPCs or CPMs to estimate costs.
• Alternatively, you can benchmark using industry and sector reports if you have no previous results to refer to. For example, Socialinsider provides industry benchmarking reports.

Reach and value of audience

How many people, realistically, are within the target audience that you feel you can reach? We all want to be highly successful and make millions of dollars for the organizations that we work for. But let’s be realistic!

Ask yourself the following questions:

• How do we ascertain a successful measure of new customers?
• How many customers do you need to make in order to keep the lights on?
• How many customers do you need to make to be really successful?

Budget available, and priorities

What follows next is the important question: “How big is your budget?”

If you think you will be given a small budget, focus on your target audience through a specific lens. For example, suppose your target audience is 25 to 35-year-olds, and you have a small budget. In that case, you’ll need to prioritize where you want to spend your budget.

A key question to then ask, in this example, is: Do you think you will be more successful with a male or female audience? For multimarket, suppose you think that you’re going to be the most effective with city dwellers. In this case, only target the capital cities of specific markets to make sure that you’re effective.

Ad spend allocation

How much money do you realistically feel you can invest in digital? It is often the case that when you go through this process, you will realize that you don’t have enough money to do absolutely everything you want to do. Don’t worry! Nobody ever has enough money for their digital marketing strategy. You have to give money to other channels or other media because, strategically, it’s the right thing to do.

This is important because a lot of brands early on don’t invest in media, and it can become quite a shock when you realize that you actually have to pay-to-play for a lot of the media channels that you should be using. Some brands start out with social, and then ignore search or ignore display for a long time, and then they realize they’re missing those elements in their media mix. So, it’s important to anticipate ad spend allocation and if it will be enough.

Under-investing

What about the final consideration: under-investing? While it’s prudent to be cautious about how much you spend on your campaigns, you also need to avoid under-investing. Is there a gap that you need to now make up? This is a commonly occurring challenge for a lot of businesses that might find that they have under-invested in digital. And then, suddenly, they need a new website, to invest in social channels, and to create new content.

All of that can be quite daunting, so you need to find a way to make sure that you understand how you might be able to spread those costs out. If you feel you’re under-investing, then you need to make a case for more investment. Alternatively, you might need to make a case for a better use of your resources.

The problem with under-investing is that you can find that you’re not doing enough to even try to make digital work. It will not be a success and you will find yourself facing challenges with it not working. However, the reality was that the business didn’t invest correctly in the first place. This, of course, then undermined the effectiveness of your digital strategy campaign.

The budget plan

A budget plan is a document that counts all monetary costs associated with your digital marketing activities on a monthly, weekly, or daily basis. Budgeting plans allow you to plan out all investment month by month, over a specific period of time. Planning long term will secure investment. Without a plan, money will be moved around, resulting in digital being under-invested in, under-performing, and ultimately being questioned.