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More on budgeting digital marketing: getting ROI

If you’re considering allocating some marketing dollars to digital marketing in 2020, or increasing the amount... You’re making a wise decision. 

According to Vertical Measures, “B2B marketers that allocate 40% of their budget to content marketing were the most effective, while marketers that spent 14% were least effective... and of those companies surveyed, 38% said they will increase their content marketing budgets in the coming year.”

Now, the most important question...

How much should you spend on digital marketing?

As with all concise answers, it depends.

Are you a new company or an established company?

Vertical Measures goes on to say that a new company should be allocating 12-20% of their gross revenue to digital marketing efforts, while an established company should contribute 6-12%.

To some, the amounts may seem like a lot. To others, the amounts may seem just right. One of the best ways to determine the amount of dollars to dedicate to digital marketing is to look at money being spent on traditional marketing methods.

Have those methods been effective?

Can those methods even be measured? Part of the problem with traditional advertising is the inability to track the effectiveness of certain methods.

Digital marketing is easier to track effectiveness and keep an eye on the results achieved.

Major Categories of Digital Marketing

If you’ve looked into digital marketing, you may have been overwhelmed by the amount of stuff that may fall under its definition. Maybe that has scared you away from setting a budget.

In an effort to help you relax, your digital marketing efforts should fall under three main categories:

  • Online content creation + Search Engine Optimization (SEO)
  • Content promotion
  • Analysis of the results

That’s it. Now let’s break it down a bit further so that you have a clearer understanding of what these categories would encompass.

Online content creation + SEO: This is creating the content and using industry terms, tags, etc. in order to gain better visibility by the target audience.

  • Website
  • App development
  • Social Media
  • Videos, blog posts, and any other online content

The second part to this is optimization. For example, if you’re working with a digital marketing agency — not only should they be doing the development of the content, they should also be creating it with SEO in mind. There’s no sense paying for something if it’s not going to be found by your target audience, which is where SEO will help.

Content promotion: Once content has been created, the next step is to get it in front of the right people — your prospective customers. This can be done in a few different ways:

  • Social media marketing
  • Email marketing
  • Paid search options, such as Facebook or Google ads

Analyzing the results: The other component of a digital marketing strategy is analyzing the data. You want to find out what works and what doesn’t. Here are some ideas of what you should be tracking —

  • Email open rates, click through rates, and leads acquired
  • Social media engagement (likes, comments, shares), new fans and followers
  • Landing page traffic, unique visitors, and conversions
  • Time spent on page, clicks, and conversions on blog posts

If you hire a digital marketing agency, or you do this yourself – these are the main areas that need attention.

Determining the ROI of Your Digital Marketing Efforts

You probably want to know if you’re getting the value for the money you’re spending, correct?

To calculate the return on your investment, you need to know three key numbers:

  • Your average revenue per sale
    • Revenue/ Number of Transactions = Average Revenue per Sale
  • Your profit margin
    • Revenue – Expenses = Profit
  • Lifetime value of a customer
    • Lifetime Transactions x Lifetime Revenue – Lifetime Expenses = Lifetime Value of a Customer

When planning for next year’s budget, it can be helpful to look at last year’s results to determine whether you should spend more or less.

You’ve got your three key numbers: Average Revenue per Sale, Profit Margin, and Lifetime Value of a Customer.

Based on what you spent for digital marketing, how many New Customers did you bring in?

What’s the Lifetime Value of your customer?

Now, take New Customers multiplied by Lifetime Value.

Subtract the amount spent on marketing. That’s your GRAND TOTAL.

 

And what’s your ROI?

GRAND TOTAL / Amount Spent = ____% return on investment

Key Takeaways

The best part about digital marketing is that the results are measurable. You can easily narrow your efforts into three key areas of focus and very quickly arrive at your ROI.

This will help inform your budget for the upcoming year.

Digital marketing can make a huge difference for companies big and small, new and old. If you want to see what’s possible, we’d love to talk more. Reach out to us here.

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At AKC Marketing we honestly assess the perception of your company. We push to market you above your competition. We do this by igniting your inner brand - focusing on what your true value to the marketplace is. To make it impossible to be ignored in your industry.
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