ALLOCATING YOUR 2018 DIGITAL MARKETING BUDGET. October 2017
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1 ALLOCATING YOUR 2018 DIGITAL MARKETING BUDGET October 2017
2 HELLO, TRENDSETTER The constant evolution of technology and the rapid expansion of digital media has made investing in digital marketing channels a top priority for the modern marketer. In fact, Forbes recently reported that digital marketing spend in the United States will near $120 billion by 2021 that s a 66% increase from the $72 billion advertisers spent last year. Notably, while digital spend is expanding, digital tactics are becoming more targeted. More than ever, organizations are focused on quality over quantity when it comes to choosing marketing channels and allocating budgets. Marketing leaders are facing unprecedented pressure to report on the success (aka ROI) of their campaigns. This ebook will highlight the most critical steps of your 2018 planning process, answering all of your important questions, including: How much should you spend on Digital Marketing in 2018? Which channels should you allocate funds toward? How will you track performance and define success? What can you do to attribute revenue to marketing spend? Ready to get down and dirty with digital budget planning? Here s what you need to know. MORE THAN EVER, ORGANIZATIONS ARE FOCUSED ON QUALITY OVER QUANTITY WHEN IT COMES TO CHOOSING CHANNELS AND ALLOCATING BUDGETS. 2
3 STEP 1 HOW MUCH SHOULD YOU SPEND? Before you get too excited, try not to act like a kid in a candy store. Budgeting decisions must be strategic and data-driven. The most important starting point for determining your 2018 digital marketing budget allocation is understanding your total marketing budget. The 2017 CMO Survey reported that most organizations allocate approximately 11% of their total budget to marketing, or 7% of total revenue. Generally speaking, B2C companies tend to spend slightly more than their B2B counterparts, and smaller organizations often allocate a larger percentage of their revenue to marketing while they are in the growth stage. Whether your organization prioritizes traditional or digital marketing will be determined by your business model and your priorities for the coming year. However, it should be no surprise that digital spend in is steadily surpassing traditional spend year over year with industries across the board reporting an 11-18% increase in digital budgets and a.4-3.6% decrease in traditional. It was recently reported that 81% of consumers were conducting online research before purchasing products, so, even if your product or service can t be purchased online, a strong digital presence is imperative. In 2018, it is predicted that nearly 35% of marketing budgets will be allocated towards digital.this percentage is likely to trend even high in B2B Services and B2C product where the percentage of sales through the internet is higher. So, what does all of this mean for you? Let s use an easy example to demonstrate. Consider an organization generates about $14.2M in revenue. By allocating roughly 7% of that annual revenue towards the marketing budget, we would be working with $1,000,000 in 2018 marketing spend. Furthermore, if we take the average spend of approximately 35% on digital marketing specifically, we re left with $350,000 to allocate across digital channels. Quick Hack Need to figure out how much budget to allocate for your business model? Start with these questions: 1 What is your company s overall annual revenue? 2 How aggressive are your business growth goals? 3 How much of your sales come from digital channels? 4 What is the average value of a sale and how much marketing investment does that warrant? IT SHOULD BE NO SURPRISE THAT DIGITAL SPEND IS STEADILY SURPASSING TRADITIONAL SPEND YEAR OVER YEAR. 3
4 STEP 2 WHERE SHOULD YOU SPEND IT? Now for the fun part. Once you have a good idea of how much you should plan to spend on digital marketing to compete in today s marketplace, you can start deciding how to allocate that amount across channels. In 2018, there is a dizzying array of digital platforms to choose from. Choosing platforms is a step that requires a big-picture mindset and takes into account your business model and primary initiatives. However, since ROI reigns in 2018, we ve prioritized and focused in on the channels that generate the most bang for their buck. 1 Website: 10% of Budget Your website is the beginning and the end of all things digital marketing. It is the face of your organization and where most of your digital campaigns should point to. Even the best laid digital marketing plans can be squandered by a poor website experience. If your website is more than a year old, consider a refresh to evolve the experience, ensure mobile-friendliness, and enable ADA compliance. If your website is more than 3 years old, consider a fresh start with a full re-design to re-invigorate and elevate your digital presence across all channels. Depending on the size of your site and the scope of the project, your costs for this initiative will vary. For general planning purposes, we ll use 10% of budget as a starting point. Quick Hack Get started with a modern marketing strategy with these three key steps: 2 Marketing: 20% of Budget marketing consistently reports the highest ROI across industries with 53% of marketers reporting a Good or Excellent ROI from the channel, which is why it represents a large amount of our budget here. The days of bulk mailings are behind us and consumers not only crave a personalized experience, they now expect it. In order to strategically execute campaigns that drive revenue, organizations will need to invest in the people, processes, and technology to get it done. This often includes strategy sessions to differentiate your target personas, implementation services for mapping the customer journey and building out effective engagement campaigns to address the various parts of the funnel, along with the cost of a modern marketing automation system. 1 Map out the buyers journey for your product or service and sync it up with your sales cycle and supporting marketing communications. 2 Get to know your prospects and define the buying personas that your marketing messaging must address. 3 Craft educational and informative content for use at various stage of the sales funnel. 4 Begin building out and testing nurture programs to engage your target personas throughout their buyers journey. EVEN THE BEST LAID DIGITAL MARKETING PLANS CAN BE SQUANDERED BY A POOR WEBSITE EXPERIENCE. 4
5 STEP 2 WHERE SHOULD YOU SPEND IT? 3 Search Engine Optimization: 15% of Budget 45% of marketers report a Good or Excellent ROI from Search Engine Optimization efforts. That, including the fact that SEO is the lifeblood of your website, which we ve already established is a crucial element of digital marketing, makes this channel a top priority for your 2018 digital marketing budget. Unfortunately, while everyone in 2017 seems to acknowledge the importance of SEO, few of us can actually claim to be experts in the area. To maximize your budget spend and your ROI, you ll need someone who knows what their doing. Think agency not consultant as this initiative won t perform with a set-it-and-forget-it mentality. A good SEO strategy is proactive and always evolving, working like a machine to drive the right traffic to the right place on your site at the right time in their buyers journey. This means devoting valuable time and resources long-term, instead of investing in a one-time audit or update. A GOOD SEO STRATEGY IS PROACTIVE AND ALWAYS EVOLVING, WORKING LIKE A MACHINE TO DRIVE THE RIGHT TRAFFIC, TO THE RIGHT PLACE, AT THE RIGHT TIME IN THE BUYERS JOURNEY. 4 Pay-Per-Click Advertising: 12% of Budget Ah, the enigma that is PPC marketing. Between the campaigns, the budgets, the keywords, the bids, the ads, and the sheer volume of PPC options available, it s easy to get overwhelmed here. However, PPC s importance is undeniable. Furthermore, with the rise in machine learning, platforms are now better than ever at enabling organizations to deliver their message to their perfect target using In-Market audiences, similar audiences, and more. PPC should represent a significant source of your website traffic and lead generation, especially for businesses that generate revenue online. Depending on your keywords and competition, your spending will vary here, but 12% of budget is a good benchmark. 5 Content: 15% of Budget Yes, we know it sounds a bit stale but the fact of the matter is that content is still king. It has just become so ubiquitous in digital marketing that it is easy to glaze over. Your content (and your content budget) will determine the success of your other digital campaigns, as content generally accounts for most of the CTAs across PPC, Marketing, and Social. It is also critical to engaging website experiences and effective SEO strategies. Great content, and an even better content strategy, will help drive top performing campaigns. That is why it takes a big piece of the digital marketing budget in 2018, and in the foreseeable future. Plus, 43% of marketers report a Good or Excellent ROI from content. Case and point. 6 Social Media: 8% of Budget Although organizations report a surge in social media investment currently, and in the future, research suggests that companies are still struggling to integrate social with their other strategies, and failing to connect social to company performance. However, social is an undeniably impactful platform in terms of powering overall brand strategy by interacting with and learning more about your target customers. A sound social strategy that works to augment digital efforts on other channels can make a little can go a long way here. For that reason, we ve allocated the least to social media in
6 STEP 2 WHERE SHOULD YOU SPEND IT? 7 Video: 10% of Budget It s 2018 and video gets its own line item in the digital marketing budget. Why? because 65 percent of business decision-makers visit a marketer s website after viewing a branded video, according to comscore. In fact, it s predicted that by 2019, video will represent over 80 percent of all internet traffic. So, if your organization wants to capitalize on that, you ll need to devote resources to create engaging, quality video. This can be difficult and expensive, especially if you don t have video expertise and equipment in house, which is why it accounts for 10% of our 2018 budget. While there are great resources and services, like Wistia, that can help small businesses get a video program up and running, organizations that are serious about becoming competitive with video may want to consider enlisting the creative talents of an agency in order to stand out as a leader in this rapidly growing playing field. 8 Contingency: 10% of Budget Sound risky? We get it. Leaving 10% of your budget technically unallocated can be slightly nerve wracking. But, building a contingency into your budget allows you to be more agile and proactive about monitoring what is working and what is not. The contingency can buffer the loss of an ineffective campaign, while bolstering the success of another. If your investment in a certain channel or campaign missed the mark, your contingency can help pad your budget to ensure you stay on track with your ROI goals. Conversely, if a campaign or channel outperforms expectations, your contingency can be allocated there to further capitalize on and continue the success. Furthermore, contingency can be used to beta test new trends, platforms, or audiences to help you stay ahead of the curve. Quick Hack Capitalize on your budget contingency by proactively monitoring progress and making adjustments as needed with these three steps: 1 Set up consistent time frames for monitoring campaign performance. This might be monthly or quarterly depending on your campaign scheduling. 2 Use previously established goals and metrics to determine which channels are at-risk of not meeting your long-term goals and which channels are exceeding expectations. 3 Shift spend strategically away from poor performers to capitalize on campaign success elsewhere. 65 PERCENT OF BUSINESS DECISION-MAKERS VISIT A MARKETER S WEBSITE AFTER VIEWING A BRANDED VIDEO... BY 2019, VIDEO WILL REPRESENT OVER 80 PERCENT OF ALL INTERNET TRAFFIC. 6
7 STEP 3 HOW DO YOU TRACK PERFORMANCE AND DEFINE SUCCESS? Time to see if you achieved your #goals. We, as digital marketers, know that when we plan our budgets, we must also plan how we will track spending and performance and how we will ultimately define success. What are your marketing priorities? How will each of these channels contribute to your marketing goals? Success on individual channels can be defined differently, from clicks to shares, to conversions, there are hundreds of stats available to communicate campaign performance. The days of vanity metrics are over, and the age of marketing revenue attribution has arrived. Executive leaders no longer want to hear about opens, they want to know how each marketing activity affected sales. Being able to prove that your marketing spend generated real, attributable revenue in 2018 is the height of success for any marketing leader. Once you can understand the financial impact of marketing on sales, you will have reliable insight on what kind of investment in marketing is warranted in the years to come. Easier said than done, right? Thankfully, as marketing ROI evolves from a trend to a requirement for modern marketers, more and more frameworks exist to facilitate the revenue attribution process. You can choose an existing attribution model depending on your business model and your customer journey, or create a custom one. The simplest models include First Click Attribution and Last Click Attribution, which fit mostly online customer journeys best, attributing all the revenue from the customer to the channel where their first, or last, click occurred. For more advanced customer journeys, multi touch attribution models like the U-Shaped, W-Shaped, and Full-Path models can be applied. Quick Hack Stressed about goal setting and not sure where to start? Follow the steps below to develop cascading goals throughout your team and your channels: 1 Determine the overall goals for your marketing efforts in Map out the initiatives, campaigns, and channels that will contribute to each goal. 3 Define a point person that will be held accountable for each initiative. 4 Set metrics for success in each channel, communicate them to the team, and ensure each point person consistently tracks and reports on progress in order to roll up the results to the top level goal. THE DAYS OF VANITY METRICS ARE OVER, AND THE AGE OF MARKETING REVENUE ATTRIBUTION HAS ARRIVED. 7
8 LOOKING AHEAD: LET S DO THIS If the last few years have shown us anything, it s that the marketing industry is constantly evolving, and it shows no signs of slowing down in Marketers today have more responsibility and expectations placed upon them than ever before. We need to be strategists, technologists, analysts, and much more. However, with great responsibility comes great power (that s how that saying goes, right?). Starting with strategic, data-driven budgeting and planning, marketing leaders can ensure that they put the right people, processes, and systems in place to drive growth, innovation, and revenue. By rising to this momentous occasion, we can solidify our seat in the C-Suite and take a more prominent role in the strategic leadership of our organizations. So, bring it on Let s do this. STARTING WITH STRATEGIC, DATA-DRIVEN BUDGETING, MARKETING LEADERS CAN ENSURE THAT THEY PUT THE RIGHT PEOPLE, PROCESSES, AND SYSTEMS IN PLACE TO ACCELERATE GROWTH AND MAXIMIZE REVENUE. [SOURCES] FOR-YOUR-BUSINESS 8
9 BECOME THE TOP OF THE FOOD CHAIN Set Up a Consultation With Our Team of Experts Now that you have all the pieces to assemble your digital marketing puzzle in 2018, it s time to get started. But don t worry, you don t just have to wing it. Partnering with a digital agency like Sparxoo can show you how to elevate yoor brand, maximize your marketing ROI, and a ccelerate organizational growth. So what are you waiting for? Let s chat we don t bite... usually. Rob Kane Vice President of Client Development rob@sparxoo.com Adrienne Morgan Vice President of Strategic Growth adrienne@sparxoo.com Sparxoo 450 Knights Run Ave. Suite 1 Tampa, FL
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