You hear about organisations increasing their online promotion and marketing budgets all the time.
You know you need to invest in digital marketing efforts for your ministry & are ready to set aside a budget for online promotions.
But how much should you spend? What percentage of your total annual budget should go into digital marketing?
Is there an industry benchmark? What is working for others?
The answer to these questions are crucial for your digital marketing success.
Online Marketing is a Profit Center and not a Cost Center anymore:
Online Marketing has evolved. There was a time when marketers could not justify the ROI (Return-on-Investment) of digital marketing, but that is starting to change (well, for the most part. There are still some grey areas).
The CMO Spend Survey by Gartner, which we will use as a primary research report for this blog post, shows how majority of marketers in business (63%) consider digital marketing & advertising as a profit center and not just a cost center, in companies worldwide.
Even though this research is a few years old and is from the business scenario (and not about nonprofits), I like the way they have looked at this problem and analysed it.
So, instead of using these statistics (which is out dated) as a fixed number, use them as a trigger for you to get the right perspective on budget allocation strategy.
63% of marketers list digital advertising as a source of marketing P&L revenue, followed closely by digital commerce and the sale of data”
How much should you spend for online promotions?
Now that you know it is profitable to spend on online marketing, the question is how much do you spend.
Even though the answer to this question depends on many parameters like your overall strategy as a business, your vision, assessment of your current growth rate, inflow, capital, current P & L, etc., if you do some research on industry trends it is possible to arrive at an indicative percentage. This could help you start thinking in the right direction.
Let us consider 3 statistics, which points us towards a global trend in digital marketing spend (from The CMO Spend Survey by Gartner)
1. Marketing Budget = 10% of Revenue:
Marketing budgets remain steady at >10% of company revenue, and 50% of companies plan an increase in 2015”
2. Online Marketing Budget = 25% of Marketing Budget
68% of companies still keep a separate budget for digital marketing, which comprises of 1/4 of the total marketing budget, on average”
3. Break up of the Online Marketing Budget – Digital Advertising, Content Marketing & Website Development
Digital Advertising is again the highest area of digital spend (13% of budget), with content marketing and website development tied for a close second (12% of the budget)”
From the above 3 research statistics, we can infer the following:
- Marketing Budget could be 10% of the total revenue
- Digital Marketing Budget could be 25% of the above marketing budget
- Break up of Digital Marketing Budget
- 13% for digital advertising,
- 12% for content marketing
- 12% for website
- the balance 63% goes towards infrastructure and team costs – which might include hiring an agency, recruiting a manager, technology, software, digital marketing maintenance, management, measurement, monitoring, research, posting, engagement, etc.
For Example: Let us assume that your total revenue is $2 million, and if you decide to go by the above numbers, your marketing budget’s breakup will look like this:
- Marketing budget – $2,00,000 (10% the total revenue)
- Digital Marketing – $50,000 (25% of the marketing budget)
- Breakup of Digital marketing budget
- $6,500 for digital advertising
- $6,000 for content marketing
- $6,000 for website
- $31,500 for infrastructure and team costs – which might include hiring an agency, recruiting a manager, technology, software, digital marketing maintenance, management, measurement, monitoring, research, posting, engagement, etc.
- Breakup of Digital marketing budget
Startups – Special Situation:
The above numbers could be closer to reality for established small organisation or small business than for startups. For startups, the marketing spend breakup might look different.
Considering the suitability and overall low-cost structure of digital media (compared to traditional media) and considering the power of social media to spread any message and create awareness, startups might need to allocate much more than 10% of their revenues (or the available capital) for marketing. And much more than 25% of the total marketing spend for digital marketing.
Hope this helps you to start thinking about digital marketing spends. Let me know if you need any help or specific advice on budgets. I will be happy to help.
And if there are any other marketing spending patterns or trends that you have come across or follow in your business. Do share your thoughts in our comments section. Thank you!
Stay Connected. Stay Blessed.