We’ve talked a lot in the past about how your investment in digital marketing works to increase profits, but how do you decide how much to invest? Here we take a look at some benchmarks and common advice.
Marketing includes research, advertising, public relations, content creation, marketing software, creative services, sales promotions, events, like trade shows, sponsorships.
According to Statista the global average for marketing is 7.7% of gross revenue, but that amount blends Business to Business companies at 2-5% and Business to Consumer companies at 5-10%. There are also stage and sector differences. Startups and companies aiming at high-growth often spend up to 20%, and brands selling packaged goods to consumers may spend 25% of gross revenue.
In Canada, according to the Business Development Bank of Canada, small businesses with under 20 employees spend about $30,000 per year, while those with more than 50 employees spend $100,000 or more.
A Made in Canada article says that most of those budgets are spent online, and highlights that search engine optimization is the most important, providing for half of online marketing ROI. (Taking a slight tangent, if you aren’t already on their list of Canadian companies, you can submit your info here.)
So, now that you have some benchmarks, here are some benchmark ways to optimize that budget.
Digital First
Your highest investment should be in digital methods, with traditional methods reserved for specific target markets that are more likely to respond to these.
70-20-10 Allocation
Spend 70% on proven tactics and channels based on your data. Spend 20% on experimental strategies and 10% on new, untried tactics. Make sure you test and measure the new methods early and often.
60/40 Split
Use about 60% of your budget for brand building and longer-term impact, and 40% into short-term sales campaigns.
3-3-3
The 3-3-3 rule of thumb ensures that you don’t sabotage your efforts with a shotgun approach. Focus on three segments of your target market, use your three best performing channels, and deliver three main messages.
Base Decision on Data
Tracking costs, metrics, and other key performance indicators is essential, and should guide your budget allocation decisions. Monitor results regularly, and if something isn’t working, make adjustments or let it go.
