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A Step By Step Process To Plan Your Digital Marketing Budget

Recently, I’ve been very active on Instagram and have been rolling out marketing hacks. Other than the awareness factor, I am doing this to ensure I have a keyword repository of my learning. The online world is full of knowledge and I am using Instagram as my notepad for me & for others.

While I shared one hack on how to track your traffic source using UTM URL builder, somebody pinged me from Malaysia. He does prototyping, 3D modeling and manufactures custom parts. Since last 1 year, he has been using his Instagram to showcase his work and takes preorder to be on the safer side. He wants to increase his preorders and was looking an answer to it. His first question was — How would Digital Marketing help him to gain more orders while maintaining a positive ROI? I found this question very interesting as he was actually using a digital platform but was not able to acknowledge its true essence.

The very same day, one of my peers who is a hardcore fintech enthusiast asked me to share my knowledge with him in this aspect as he is planning to start a fintech weekly newsletter where he would curate fintech happenings. Before jumping into this, he wanted to gain some insights into digital marketing budget planning and how would it reduce the cost of acquisition?

All throughout my digital marketing career, I have seen different clients, a different set of founders but one thing is common that they would choose either one of the digital marketing ways — organic or paid. None of them focused on both the verticals. Entrepreneurs who had shoe-string budget opted in for organic inbound marketing while others who were funded opted-in for paid performance marketing for faster growth.

Both have its own benefits and timeline to show results. While people think that organic inbound marketing is non-paid because you’re mostly using content marketing, SEO optimization but one thing they ignore that they still use resources, creatives and time. So indirectly they do pay for the good amount even for organic marketing but here there is a catch. While they’re paying they need to see which path would give them more ROI or better say which will reduce their CAC (cost of customer acquisition).

I’m here to share my learning on how can you plan your digital marketing budget to reduce your CAC. Before you even plan to opt-in for digital marketing, you need to have an understanding of the customer digital journey.

There are 5 stages which eventually lead a prospect to convert into a customer and each stage has it’s own marketing channel, marketing message, and marketing expenditure.

Awareness

When people are just knowing about your brand/ product/ service.

Interest

When people show interest by clicking on your ad, article, by visiting your website/ landing page.

Desire

When people express their desire to know more about your brand/product/ service by either downloading an e-book, asking for a quote or calling you over the phone.

Action

When people opt-in and pay for your product/ service.

Post action

When people have bought your product/ service and you want to keep them engaged to retain them.

Typically the customer journey looks like this and one needs to align the budget accordingly to acquire a customer at low CAC.

Budgeting

This is the most logical step where you will analyze how digital marketing can help you acquire your customers while giving you a profit. Even if you’re outsourcing your digital marketing activities or hiring an in-house team, do ask to create a budget plan and help them with their questions because you’d be in the best position to answer about your business metrics.

Since we don’t have the exact data for your business, let’s make few assumptions and you can use the same to detail out your own marketing budget plan.

Assumptions

  1. You want to spend at initial 3 stages (Awareness, Interest, and Desire) to drive people towards action.
  2. Let’s say you’ll be using Facebook marketing, video marketing, Adwords search and display media to acquire your customers.
  3. If you’ve done the marketing before you must be having data to give you an assumption of CTR and number of visitors according to expenditure. If you haven’t done before, let’s follow this formula:

a) Each stage has a different conversion rate.

b) Number of visitors = Planned spend/ cost per click

c) Total sales = Number of visitors * Avg conversion rate

d) ROI = ( Profit * Number of sales) — Spend

4. Stages:

Awareness Conversion Rate: 0.05%

Interest Conversion Rate: 0.1%

Desire Conversion Rate: 0.3%

5. Profit: Let’s say for every sale you make $299 as profit.

6. Total marketing budget for a quarter: $50K

Your budget allocation should look something like this:

Budget allocation for different stages of customer lifecycle:

Awareness

For Cost/ Click, you can look over standard average metrics for your particular industry

Interest

For Cost/ Click, you can look over standard average metrics for your particular industry

Desire

For Cost/ Click, you can look over standard average metrics for your particular industry

Note: We’ve to acquire customers from these 3 stages with a total positive ROI.

ROI: Budget allocation

Now you’ve to carefully plan out your budget across three stages to ensure a positive ROI. Remember that, you have to use $50K for a quarter.

Let me help you fill in the data and show how it can result in acquiring customers while maintaining a + ROI.

Final Budget

Awareness

Interest

Desire

ROI

Key Results

This digital marketing budget planning acquired you 234 new customers within a quarter at an expenditure of $50K with a profit of $19966 (almost 40%).

Insights you should take care of before you plan

a) Have a clear defined SMART marketing objective.

Ex: Acquire 100 customers within 3 months at a total marketing budget of $50000.

b) Research on the marketing trends in your business sector. B2B and B2C work very differently. Invest only where your users would be. If your user would be on Twitter, consider spending there. If your user is a CXO/ HNI, it’s difficult to target them through Facebook. Restrict yourself spending here for acquisition. In this case, you can consider Facebook only for branding.

c) Check out industry standard click-through rates for different channels.This will help you in creating a budget plan and to predict the ROI.

d) Keep doing A/B testing for each channel through your marketing timeline. This will help you in optimizing your expenditure and results as well.

Hope this gives you a broad idea on how to kick-start your digital marketing planning. It comes with a cost, so do consider making a budget plan before even you jump into this.

Next, I’ll be writing in detail about which digital channels should you consider for your business and how those channels will give you a good growth.

You can also read: How our first customers became our micro-influencers (And doubled our average order value).