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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



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 reveal the potential return and whether it's worth investing in Digital Marketing and how easily (or not) your FDs arm can be twisted!

First, Work Out The Potential Return

To do this, all you need are a few of your website's current metrics AND Lollipop's Inbound Revenue Calculator. Then you can estimate, with much greater accuracy, the potential return and how much you should be spending on digital marketing. ROI_calculator.png

This handy calculator can show you 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.

To start, simply input your metrics and click on the 'More Stats' button at the end of the page.Pasted_image_at_2016_04_18_09_57_AM.png

Looking at the first number in the 'Revenue Growth if Both Increase' section will show you the predicted ROI if only the lowest increases are achieved for your business. 

The further you go down, the more optimistic the estimates get. The great thing about digital marketing is that your efforts are compounded, so even if you only achieve minimal results in the first few months, these will increase - providing you have a decent marketing strategy. Without a strategy you won't go far, but... I digress. 

Now you know the return you can expect to achieve, download your results using the button at the top 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. 

You now have to calculate the percentage profit for each new customer across their entire relationship with your company. Depending on which products/services your average customer buys throughout their relationship with your company, this might be a tricky task, but keep going and estimate if needs be. 

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 and work out how much would be profit.  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. 

Digital marketing can cost anything. You could go to a 3rd World supplier and pay as little as £10 per month or choose a swanky London Agency and pay £10,000s per month. It's probably not going to surprise you, but we'd recommend avoiding both of these options. The first won't work and the second involves swanky overcharging!

Let's say an average Digital Marketing investment starts from £1,500 a month for a SME, which is coincidentally where our pricing structure kicks off. (It's not coincidental at all...).

If your new revenue calculator derived number is greater than this, then give us a call! 

Even if it isn't, Inbound Marketing compounds over time and the return will get greater and greater, allowing for a bigger marketing budget.

It's an investment.

Digital Marketing Budget - Key Take Aways

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

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

Oh, and have the guts to gamble. If you don't embrace digital now, when will you?

So don't wait for your competition to steal a march, work out the potential returns for your business, now! Just click on the image below to use our calculator.

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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.

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