How to define your company's digital marketing budget
Posted: Tue Jan 28, 2025 9:59 am
Many companies have great difficulty in defining their Digital Marketing budget. Many business owners fail to see the importance of the digital area and see it as just another cost with a dubious return and an expense that only exists because it is indicated in the manual as almost mandatory.
This happens when Marketing's main function is simply to create buzz around the brand and not as a set of actions that can be measured and proven to have effective results (sales!).
Even a relevant goal, such as building a brand, is difficult to quantify and is only felt in the long term. That's why when things get complicated, marketing expenses are often the first to be cut.
Digital Marketing allows you to avoid this scenario, stopping marketing jamaica whatsapp data from being seen as just another cost for the company and becoming an important source of revenue, a machine for attracting new customers in conjunction with the sales department.
There are two different ways to define your digital marketing budget:
When the Administration sets the budget
When Marketing suggests the budget and asks for approval from Management
The first option is the most common: the company's management allocates part of its budget to Digital Marketing and the person responsible for the area determines how this budget will be invested.
The second option is a little different: the Digital Marketing department itself is the starting point. Based on the company's objectives for the area, the person responsible for Marketing indicates what they consider necessary to achieve these objectives.
The budget request is submitted for approval by management. This usually happens mainly when digital is a new area in the company and there was no previous budget. Let's see, in both cases, how management should make this assessment and how Marketing can outline its action plan.
How Management Should Define the Digital Marketing Budget
In smaller companies and with simple management manuals, there is an old practice that says that a part of the turnover (usually something between 3-5%) should be used to invest in Marketing.
You can use other, more rigorous ways to define what makes the most sense for your business:
Analyze sales and growth history and make a forecast
Based on the company's history in the previous period, it is easier to draw up an acceptable growth forecast for the next year. Of course, it is possible to include variations according to the growth of the economy, the market and even the management's own feeling. But taking the history into account as a basis, it is more difficult to escape reality.
Define your sales goals before thinking about Digital Marketing investments.
Find out the margin for each product and its availability for Digital Marketing
To identify how much can be spent on Digital Marketing, we first need to understand what the available margin is. Calculate an estimate of the average revenue your company has per sale. If the model is subscription-based, it is recommended to have an estimate of how long each customer stays with the company in order to then draw up a total expected value.
Then, calculate the average cost of delivering what you promised during the sale. Add up all costs except marketing (also include the cost of raw materials in the case of products). Divide by the number of sales to get a general idea of how much it costs to deliver each sale.
This model is simple and can clearly be expanded upon. It is possible to assign costs in much more detail, but it is enough to make an initial assessment. What is left is basically the margin per sale. You need to assess how much of this margin your company needs/is willing to invest in Digital Marketing .
To get to this point, it helps to look at your history once again. Calculate your marketing expenses from previous months and divide that by the number of sales to determine how much you’re spending on digital marketing per sale. If you’re trying to increase your growth rate, you’ll usually need to invest more. If you’re trying to maintain your growth rate, you usually won’t need to make many changes.
Also compare with other priorities: if the company's goals are more related to customer growth, marketing and sales gain more importance. If it is to expand production, increase quality or other items along those lines, there may be less left for Marketing.
Cross-reference the two previous pieces of information to determine the Digital Marketing budget
If you know what your sales target is and how much you can spend on Digital Marketing for each sale, just multiply one by the other and that's it, the calculation is done. You now have a defined Digital Marketing budget!
Assess whether there is flexibility for anticipation and structural actions
Investment distribution should not always be a direct reflection of sales. For companies that do not yet have or need a new website, creating a website is, for example, a larger investment that needs to be made first.
Determine what level of flexibility the Digital Marketing manager has in terms of dates to make their investments and show what openings for negotiation are available.
This happens when Marketing's main function is simply to create buzz around the brand and not as a set of actions that can be measured and proven to have effective results (sales!).
Even a relevant goal, such as building a brand, is difficult to quantify and is only felt in the long term. That's why when things get complicated, marketing expenses are often the first to be cut.
Digital Marketing allows you to avoid this scenario, stopping marketing jamaica whatsapp data from being seen as just another cost for the company and becoming an important source of revenue, a machine for attracting new customers in conjunction with the sales department.
There are two different ways to define your digital marketing budget:
When the Administration sets the budget
When Marketing suggests the budget and asks for approval from Management
The first option is the most common: the company's management allocates part of its budget to Digital Marketing and the person responsible for the area determines how this budget will be invested.
The second option is a little different: the Digital Marketing department itself is the starting point. Based on the company's objectives for the area, the person responsible for Marketing indicates what they consider necessary to achieve these objectives.
The budget request is submitted for approval by management. This usually happens mainly when digital is a new area in the company and there was no previous budget. Let's see, in both cases, how management should make this assessment and how Marketing can outline its action plan.
How Management Should Define the Digital Marketing Budget
In smaller companies and with simple management manuals, there is an old practice that says that a part of the turnover (usually something between 3-5%) should be used to invest in Marketing.
You can use other, more rigorous ways to define what makes the most sense for your business:
Analyze sales and growth history and make a forecast
Based on the company's history in the previous period, it is easier to draw up an acceptable growth forecast for the next year. Of course, it is possible to include variations according to the growth of the economy, the market and even the management's own feeling. But taking the history into account as a basis, it is more difficult to escape reality.
Define your sales goals before thinking about Digital Marketing investments.
Find out the margin for each product and its availability for Digital Marketing
To identify how much can be spent on Digital Marketing, we first need to understand what the available margin is. Calculate an estimate of the average revenue your company has per sale. If the model is subscription-based, it is recommended to have an estimate of how long each customer stays with the company in order to then draw up a total expected value.
Then, calculate the average cost of delivering what you promised during the sale. Add up all costs except marketing (also include the cost of raw materials in the case of products). Divide by the number of sales to get a general idea of how much it costs to deliver each sale.
This model is simple and can clearly be expanded upon. It is possible to assign costs in much more detail, but it is enough to make an initial assessment. What is left is basically the margin per sale. You need to assess how much of this margin your company needs/is willing to invest in Digital Marketing .
To get to this point, it helps to look at your history once again. Calculate your marketing expenses from previous months and divide that by the number of sales to determine how much you’re spending on digital marketing per sale. If you’re trying to increase your growth rate, you’ll usually need to invest more. If you’re trying to maintain your growth rate, you usually won’t need to make many changes.
Also compare with other priorities: if the company's goals are more related to customer growth, marketing and sales gain more importance. If it is to expand production, increase quality or other items along those lines, there may be less left for Marketing.
Cross-reference the two previous pieces of information to determine the Digital Marketing budget
If you know what your sales target is and how much you can spend on Digital Marketing for each sale, just multiply one by the other and that's it, the calculation is done. You now have a defined Digital Marketing budget!
Assess whether there is flexibility for anticipation and structural actions
Investment distribution should not always be a direct reflection of sales. For companies that do not yet have or need a new website, creating a website is, for example, a larger investment that needs to be made first.
Determine what level of flexibility the Digital Marketing manager has in terms of dates to make their investments and show what openings for negotiation are available.