It’s the question every business needs to answer at the start of the year. “How much should I spend on digital marketing for this year?”
In truth, you should probably ask this question every quarter to create a more accurate representation of your needs at that moment. Thinking in terms of years isn’t enough to grow your business by quarter.
There are a few key things to keep in mind before you make any decisions on marketing spend.
Creating a Marketing Budget for 2021
“How much should I spend on digital marketing for my business?” There isn’t a specific figure that answers this question. It’s dependent on multiple factors, including the size of your company and your current marketing successes. Here are a few key steps to take along the way.
A Percent of Your Gross Revenue
Most often, the best starting point is to apply a percentage of your gross revenue towards marketing. How much is that? Most often, the goal is between 7 to 12 percent. Yes, that’s a lot. If your company is making under $5 million a year, aim for 7 to 8 percent of gross revenue. Larger companies stand to potentially profit more so they often have a larger marketing budget to spend. The illustration below from Forrester Research shows the average marketing spend by industry.
Remember, putting money back into your marketing ensures long-term growth for the company. Cutting back limits your reach. If you’re not marketing, sales are probably declining. If you’re not marketing and sales are increasing you’re probably leaving money on the table.
Consider Project Needs
Determining how much to spend should also be based on what you know needs to be completed. For example, if it is time for a completely new web design, that’s going to add a good amount on top of your marketing budget. If you feel you need to get more traffic to your website, you’ll want to budget for things like SEO and paid ads. Think you’ll need a better online reputation? Then reputation management costs are something you should consider. These things increase your marketing budget but almost always pay for themselves, at bare minimum. In fact, marketing done well provides excellent return on investment – we call it Marketing Return On Investment or MROI.
Where You’re Putting Your Marketing Budget
Consider where you plan to put that money too. It’s often best to create a digital marketing blueprint or complete a competitive analysis at least annually to determine the right focus for your efforts and beat the competition. Things to consider include:
- SEO updates and modernization
- Content creation to deliver your mission, values and communicate with your audience (and the search engines love it too)
- Social media management needs
- Paid advertising (great ROI too)
- Target marketing updates
- New product/service launches and the marketing you need for them
Take a closer look at how your competitors are spending their money. What areas are your weaknesses in terms of their competition? That’s potentially an area to focus your efforts on, or, in some cases, it may be best to stop competing directly and to find other avenues to reach your audience.
Some companies may want to invest in new strategies such as the use of video marketing. As noted by Oberlo, 85 percent of all internet users in the US watched online video in 2018. Canada is about the same.
So How Much Should I Spend on Digital Marketing for 2021?
Well, in short – about 5-10% of your gross revenue in 2020. More if you want to grow faster. Less if you want to grow at the same rate as last year. None if you’re looking to scale back the business. But if it’s real growth that you’re after, avoiding marketing because you’re not sure what to do is not the best decision for your business’ future.
If you’re still unsure about how much to spend, don’t go it alone. Let our team at Canopy Media help you create an effective plan that addresses your unique needs while providing great MROI (marketing return on investment, remember?). We’ll find the options that best meet your business goals and can comprehensively change your business’s future by boosting MROI. If we don’t think we can help you, we won’t even pitch you. Want to know more? Feel free to reach out anytime and start the conversation.
