Are you a business owner looking to create and stick to an effective digital marketing budget for 2023? Setting up your digital marketing budget can be daunting. However, with careful consideration of the resources you have available and smart predictions about projected growth in key areas, getting your finances in order doesn’t have to feel like a chore. In this article, we’ll explore five detailed steps that are essential for constructing an accurate yet organized numerical blueprint for success in the upcoming year!
Assess Your Current Business & Goals for the Coming Year
As we approach the start of a new year, taking the time to assess your current business and setting clear goals for the coming year is essential for continued growth and success.
A well-planned marketing budget should define specific objectives for revenue growth and acquiring new customers in the coming year. To establish these goals, it’s advisable to consult with your board of directors, investors, and marketing team to set realistic expectations. After outlining your top-line goals, you can then strategize on how to achieve them and create a budget plan accordingly.
This is the perfect opportunity to reflect on the journey so far and ask key questions, such as:
- Are we on track to reach our targets?
- Can we continue to drive growth in revenue?
- What is our current customer/client capacity?
- Do we need to hire someone for our Marketing Efforts?
- Is our Ideal Customer Avatar (ICA) up to date with our current data?
Age of the Business
An additional factor that is crucial when setting a marketing budget is the age of the company. This is because younger companies may need to allocate a higher percentage of their budget toward marketing in order to establish brand awareness and generate leads, while more established companies may be able to allocate a smaller percentage toward marketing.
It’s important to keep the company’s age in mind when setting a marketing budget due to the following reasons:
- New companies may need to invest more in marketing to create brand recognition, increase market share, and generate interest in their products/services.
- Young companies may also need to compete with established players in their industry, so investing in marketing may be necessary to compete effectively.
- Established companies may already have a strong brand reputation and customer base, so they may allocate a smaller percentage of their budget toward marketing while maintaining a strong brand identity and customer loyalty.
Desired Revenue & Company Growth
Lastly, evaluate the estimated or gross annual revenue, and how you envision the business flourishing. When creating a marketing budget, it’s crucial to evaluate the estimated or gross annual revenue of the business, as well as how you envision it flourishing in the future. This information will help you to set realistic goals for revenue growth and customer acquisition.
Understanding your estimated or gross annual revenue is important because it helps you to determine how much you can allocate to your marketing budget.
For example, if your estimated or gross annual revenue is high, you may have more funds available to invest in marketing and advertising initiatives.
On the other hand, if your estimated or gross annual revenue is low, you may need to be more conservative with your marketing spend and focus on low-cost, high-impact tactics.
In addition, by envisioning how you want your business to grow and flourish in the future, you can set specific, measurable, achievable, relevant, and time-bound goals for your marketing efforts. This includes identifying the target market, ideal customer avatar (ICA), and specific channels and tactics that will be most effective in reaching them.
By evaluating the items above and following the steps throughout this article you’ll be able to determine the optimal number of customers within your Ideal Customer Avatar (ICA) to target, directly impacting your revenue goals. Remember – having easily achievable yet ambitious goals will keep you motivated to push your business forward, creating a successful and prosperous new year!
Calculate Your Average Cost Per Lead
Understanding what a lead is, and how it can help your business, is essential for any entrepreneur or marketer. In its simplest definition, a lead is a person who has expressed an interest in your product or service – and they may potentially become your customer. So, how do you calculate the average cost per lead? It’s important to consider variables like past data or research.
Reviewing Past Marketing Data
Utilizing past data, you already have valuable information about your own company’s conversion rate and marketing strategies.
When it comes to creating a marketing budget, utilizing past data is essential to ensure that you’re making informed decisions based on actual results. By analyzing your company’s historical conversion rates and marketing strategies, you can gain valuable insights that can help you to optimize your future marketing efforts and maximize your return on investment.
Here are some ways you can analyze past marketing data to see how many people converted to paying customers:
- Analyze website traffic: Use website analytics tools like Google Analytics to track how visitors are finding and interacting with your website. Look at metrics like bounce rates, time on page, and pages per session to identify which pages and content are most engaging to visitors.
- Track lead sources: Use tracking codes or unique URLs to identify which marketing channels and campaigns are generating the most leads. This information can help you to optimize your marketing efforts and allocate your budget more effectively.
- Review email campaign data: Look at open rates, click-through rates, and conversion rates for your email campaigns to see which subject lines, content, and calls-to-action are most effective at driving conversions.
- Conduct customer surveys: Send surveys to your customers to gather feedback on their experience with your brand and products/services. Ask questions about their buying journey, what influenced their decision to make a purchase, and what they found most valuable about your brand.
- Analyze sales data: Look at sales data to identify trends and patterns in customer behavior. This information can help you to optimize your sales funnel and identify areas where you can improve the customer experience.
Conduct Research on Market Benchmarks
On the other side, research-based calculations gather industry standards and benchmarks, which can be helpful to compare your performance against competitors. Here are some ways you can gather industry standards and benchmarks as it relates to the cost per lead:
- Marketing Reports and Studies: Many marketing firms and research firms publish reports and studies on industry benchmarks and standards for various marketing metrics including cost per lead. Some examples of firms that produce such reports are HubSpot, MarketingProfs, and eMarketer.
- Industry Associations: Many industry associations provide benchmarks and standards related to specific industries. For example, the National Association of Home Builders provides benchmarks and standards for cost per lead and conversion rates for companies in the home building industry.
- Online Advertising Platforms: Many online advertising platforms such as Google Ads and Facebook Ads provide data on industry benchmarks for cost per lead. You can find this information in their ad manager dashboards or in their support documentation.
Weighing both past data and research can provide insight into where your business may need to focus more to obtain cost-efficient leads, ultimately leading to potential growth and success.
Calculating Your Average Conversion Rate
Calculating your average conversion rate is essential in assessing the success of your marketing efforts and fine-tuning your strategies. It’s all about measuring how efficiently you’re able to convert leads into actual sales.
To do this, you need to capture and analyze data in a way that offers meaningful insights. Begin by tracking the number of leads generated from various sources, such as online ads, email campaigns, or social media promotions.
Then, keep an eye on which of those leads actually turned into successful sales transactions. By comparing the total number of leads generated to the number of sales made, you’ll be able to calculate your average conversion rate.
For example, if you generate 1,000 new leads, but only 50 of those become customers, then your average conversion rate is 5%.
Paying close attention to this figure can help you identify your marketing efforts’ strengths and weaknesses, allowing you to make data-driven decisions, optimize your methods, and ultimately, boost your business’s overall performance.
Determine How Many Leads You Need to Reach Your Goals
Understanding the number of leads required to hit your revenue goals is crucial in maximizing your business potential. Rushing into the process, crossing your fingers, and hoping for the best isn’t effective, but knowing your conversion rates and optimizing your marketing strategies will yield fruitful results.
To determine your magic number, you’ll want to divide your revenue goal by your average sale value, then divide that by your lead-to-customer conversion rate percentage. Let me give you an example.
Let’s say that your revenue goal for the year is $500,000, and your average sale value is $1,000. Your lead-to-customer conversion rate is 20%.
To determine your magic number, you’ll want to divide your revenue goal by your average sale value:
$500,000 ÷ $1,000 = 500
Then, you’ll divide that by your lead-to-customer conversion rate percentage:
500 ÷ 20% = 2,500
So your magic number is 2,500. This means that you will need to generate 2,500 leads in order to achieve your revenue goal of $500,000, assuming your average sale value and conversion rate remain constant.
By breaking it down in this way, you can focus your efforts on attracting the right volume of quality leads that will pave the way toward achieving your financial objectives. So grab a calculator and get excited about crunching those numbers, because a well-informed approach spells the difference between lagging behind and soaring high!
Determine Your Final Conversion Investment
Determining your final conversion investment is crucial for the success of your marketing efforts. It’s all about finding the perfect balance between the money you’re willing to spend and the number of leads you aim to generate.
Once you’ve determined your magic number, which is the number of leads you need to generate in order to achieve your revenue goal, you’ll want to figure out how much money you need to invest in marketing to generate that number of leads.
To do this, you’ll need to determine the cost per lead (CPL) for each marketing channel you plan to use. This can vary widely depending on the channel, industry, and other factors. For example, if you plan to use Facebook advertising, your CPL might be $5, while if you plan to use Google AdWords, your CPL might be $10.
Once you’ve determined your CPL for each channel, you can multiply it by the number of leads you need to generate to get your marketing budget. So the formula looks like this:
Number of leads you need x Cost per lead = Marketing budget
For example, let’s say that you determined your magic number to be 2,500 leads, and you plan to use Facebook advertising and Google AdWords to generate those leads. Your CPL for Facebook is $5, and your CPL for AdWords is $10. Here’s how you would calculate your marketing budget:
Number of leads you need = 2,500
Facebook CPL = $5
AdWords CPL = $10
Marketing budget for Facebook = 2,500 x $5 = $12,500
Marketing budget for AdWords = 2,500 x $10 = $25,000
Total marketing budget = $12,500 + $25,000 = $37,500
So in this example, you would need to invest a total of $37,500 in marketing in order to generate the 2,500 leads you need to achieve your revenue goal. Of course, this is just an example, and your actual marketing budget will depend on your unique situation and the specific channels you plan to use.
The Bottom Line
Considering the 5 simple steps for creating your 2023 Digital Marketing Budget, it is now up to you to decide which strategies need to be in place to reach your annual goal. Start by assessing your current business, setting appropriate goals, and then asking yourself how much conversion investment will be required to meet those goals. From there you should calculate your average cost per lead and conversion rate so that you can better determine the desired number of leads needed to reach those targets. Then once you are ready make sure that investments are put into place in order to successfully convert those leads. It can be a lot of work initially but once the process is set up it will be easier going forward. If at any time you need assistance feel free to contact us; we are here to help!