Businesses are in the process of preparing or finalizing their budget for 2018. Given the popularity of digital marketing, many businesses are pondering how much of their total marketing budget should be allocated to digital marketing. Furthermore, how much of the total digital marketing budget should be allotted to social media, email, online ads, content marketing, and other online channels.
Let us look at how businesses typically apportion their marketing budget:
The total marketing budget
Based on studies compiled by WebStrategies, total marketing budgets are 7% to 12% of total revenues.
As these are percentages of total revenues, the absolute figures can vary widely among industries and among companies within the same industry.
Bright Local published these data:
The digital marketing budget
In the same article by WebStrategies, it is mentioned that in 2018 the average firm is expected to allocate 41% of their budget to online.
According to Bizness Apps companies are shifting more and more money to digital because of it’s perceived R.O.I., and the ability to spend less for more return.
Almost all businesses believe that digital marketing is cost-effective and can deliver a relatively higher ROI. Equally important is the fact that results of digital marketing efforts can be measured in real time. As digital marketing is data-driven, marketers can establish metrics that can show them how effective their efforts are based on data used or considered for the campaign.
Bizness Apps mentioned further that the average SMB spends $400/month on marketing… SMBs spend on average 46% of their marketing budget on digital marketing… Social, mobile, email and search marketing represent the lion’s share of the digital marketing budget… Total marketing budgets are between 4% and 12% of total revenue… Smaller companies spend more on marketing as a percentage of their total revenue… B2Cs and online companies spend more on marketing compared to B2Bs.
While an average SMB spends $400/month on marketing, we should also consider the fact that many startups and solo entrepreneurs (like me) are bootstrapping. They usually use free online tools and approaches to promote their businesses.
If SMBs spend 46% of their marketing budget on digital marketing, it can be interpreted that they spend about $185/month on social, mobile, email, and search marketing. Startups or solo entrepreneurs may, however, choose to spend the bulk (say 80%) or even the whole of their marketing budget on digital marketing knowing that it delivers higher ROI and its results can be measured in real time.
How will the digital marketing budget change
WebStrategies stated further that budget for online marketing is expected to grow to 45% in 2020… Budget for social media advertising will represent 25% of total online spending in 2018… Digital marketing spend is growing at 11% CAGR between 2016 and 2021… Businesses who rely more heavily on the internet to generate sales (e.g. an ecommerce business), invest a greater percentage of their marketing budget towards digital.
Without a doubt, total spend on digital marketing will continue to grow.
Total digital marketing budget will only vary from industry to industry and from business to business on the budget amount or on the ratio of budget-to-revenue. Allocation per online activity will also vary depending not only on the industry and business type but also on the market competitive situation.
Startups and small businesses are most likely looking at these from a more disadvantaged position compared to established and big businesses. But SMBs can always be agile, more creative, and can always seek professional help in promoting their businesses online even on a limited budget.