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Inbound Marketing Blog

How To Work Out Your Digital Marketing Budget

[fa icon="clock-o"] June 16, 2016 [fa icon="user"] Robert Ellis [fa icon="folder-open'] Inbound Marketing

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For every business that wants to be found online there needs to be a digital marketing budget, but how much should that budget be?

It's generally advised that your total marketing budget should be around 5% to 10% of turnover - it's up to you how that's split between online and offline activities.

Yet, this is just a general rule of thumb, and in all honesty isn't very helpful if you don't know what the potential return will be. Without this I can't see many Financial Directors eager to spend 10% of revenue on marketing!

This post will make it easier for you to twist your FD's arm by revealing the compound effect when you invest in Digital Marketing - done the Inbound way!

Work Out The Potential ROI

All you need are a few of your website's current metrics AND Lollipop's Inbound Revenue Calculator. Then you can see the ROI that your website is currently generating and how various increases (in traffic, leads generated, etc..) directly translate as increased revenue for your business.

Information you will need:

Traffic - average website visitors each month

Leads - average website leads each month

Qualified Leads - the percentage of those leads that are ready for a sales call vs those who are only after information

Customer Close Rate - the percentage of leads who actually buy

Customer Lifetime Value - average value of a customer throughout their engagement with your company

To start, simply input your metrics and click on the 'More Stats' button at the end of the page.

Inbound revenue calculator digital marketing budget2.jpg

Looking at the first number in the 'Revenue Growth if Both Increase' column on the right will show you the predicted ROI if you can increase your traffic by just 10% and your traffic to lead conversion rate by a tiny 0.25%.

The great thing about digital marketing is that your efforts are compounded. Yes, you can increase the traffic (number of visitors to the website), the visitor to lead conversion rate and the lead to customer conversion rate individually. But if you do all three, you can skyrocket that bottom line. 

Now you know the return you can expect to achieve, download your results using the red button at the top right of the page so you can reference them later.

Next, it's time to work out your budget. 

How To Work Out If Digital Marketing Fits Into Your Budget

There's some maths now, but fortunately it's not too difficult. 

Remember, customer lifetime value is the value of the customer to you over their entire relationship with your company - NOT how much they will spend in that month.

In your calculator results, look at the first 'Revenue Growth if Both Increase' number - that's the figure if you only achieved the smallest of increases in traffic and lead conversion rate.  

Now work out how much of that income would be profit.  For simplicity, let's say the profit is 50%. 

It's now up to you to work out how much of that 50% you're willing to use to win this business. 

Remember, digital marketing is an unregulated industry. Suppliers can charge anything and not all agencies are equal.

Cheap or expensive, you can't even rely on a word of mouth referral unless you are sure that the recommendation is based on the metrics that are important to your business. The value is all about the effect on your bottom line.

Digital Marketing Budget - Key Take Aways

Some easy maths can really help you out when deciding on your budget.

Use our ROI calculator to measure whether your potential returns are greater than the amount you are willing to invest.

Just gather your metrics and then click on the image below to visit our calculator.

Inbound revenue calculator

Robert Ellis

Written by Robert Ellis

Inbound and HubSpot Certified, Rob uses his previous experience as a teacher to introduce people to the delights of Inbound Marketing without using all the complicated technical jargon. He speaks in plain English so everyone can understand and, being relatively new to the industry, he asks basic questions that other marketers may have forgotten. Rob is also responsible for the systems and processes at Lollipop.