Discover two different ways to outline your Digital Marketing budget to identify what will work best. There are few companies where fighting for the Digital Marketing budget is a great difficulty.
Many CEOs fail to see the area’s importance and see it as a cost center with dubious returns. Sometimes, even as an expense, that only exists because it is indicated in the manual almost as mandatory.
This happens when Marketing has the role of just making smoke and is not responsible for metrics and practices that prove its effective result. And by development, we mean sales. Like building a brand, even a relevant objective is difficult to make tangible and is felt in the long term. When things get tough, the most common thing is that Marketing expenses are cut.
Two Types Of Digital Marketing Budget
In this post, we will show you two different ways to outline your budget so that you can identify what will work best for you. Are they:
- When the Board defines the Digital Marketing budget ;
- When Marketing suggests the budget and asks for Board approval.
The first alternative is the most common: its Board of directors allocates part of its budget to Digital Marketing. Based on this definition, the person responsible for the area determines how this budget will be invested.
The second case is a little different: Digital Marketing itself is the starting point. Through the company’s objectives in the area, Marketing indicates what it considers necessary to reach these objectives. Thus, it forwards the budget request to be approved by the Board. This tends to work, especially when it’s something new to the company and there was no budget provisioned before. In this way, the area does a survey and presents it to the Board seeking approval.
How The Board Should Define The Digital Marketing Budget
Let’s start with the most common cause: the Board defines a Digital Marketing budget and how to invest that money. In smaller companies and simple management manuals, there is an old practice of saying that a part of the revenue (usually something between 3-5%) should be directed to investments in Marketing.
It is possible to use more powerful ways to define what makes sense for your business, which we indicate in the steps below.
Analyze Sales And Growth History To Draw An Expectation Based
on the company’s history in the previous period; it is easier to outline an acceptable growth expectation for the following year. Of course, it is possible to insert variations according to the economy’s growth, the market and even the management’s feelings. Still, having a history as a basis, it is more challenging to escape reality.
Please Find Out The Margin Of Each Product And Availability For Digital Marketing
To identify how much can be spent on Digital Marketing, we first need to understand the available margin.
Start by estimating the average revenue your company has per sale. If the model is by subscription, it is recommended to evaluate how long each customer stays in the company to draw a total expected value.
Then, please find out how much you spend on average to deliver what you promised during the sale: add all costs except Marketing (and also include the cost of raw materials in the case of products) and divide by the number of sales, to get an idea overview of how much it spends to deliver each sale.
This model is simple, even if we go deeper, we can assign the costs in a much more sophisticated way, but it is enough to make the initial assessment.
Cross The Two Previous Pieces Of Information To Determine The Digital Marketing Budget
You already know how many sales you intend to make and how much you can spend on Digital Marketing for each sale; multiply one by the other, and that’s it; the math is done. You already have the definition of the Digital Marketing budget!
Assess Whether There Is Flexibility For Anticipation And Structural Actions
The distribution of investment should not always directly reflect sales. For those who don’t have one, creating a website is, for example, a more significant investment that needs to come first. Determine the flexibility of dates that the person responsible for Digital Marketing has to make their investments and show what opening for negotiation is available.