Posted on 8/26/2015

How much should I spend on digital marketing?

Paul Chambers

As a business owner, I wear a lot of hats. One of my favorite hats to wear is my business development hat.  Not because I like selling, but because I love helping people. When I’m talking to a new prospect, I take some time to learn about their project, their specific needs and their business. My final question is, “What is your budget for this project?” This question typically yields one of three responses.

The first response is, “We have budgeted X dollars for this project.” This is a great response because it means the company may have a marketing budget established and has put some thought to the areas they would like to invest in.

The second response is, "We have some funds established for the project but need your help firming that number up."  This is often somewhat true and one of the more common responses as people have a range they could invest but don't really know what to expect for the final budget.

The third and most common response is, "We do not have a budget for this right now."  This is usually driven by a desire not to reveal a budget at the time or by a lack of direction on what should be invested.  

So how much should you spend on your website and digital marketing efforts?  That answer depends on a variety of factors, but to help you with that decision, I have outlined three tips for helping you determine your digital marketing spend:

  1. Determine a rough estimate. At the most basic level, your digital marketing spend should be a percentage of your annual revenue. According to the CMO Spend Survey 2015, marketing budgets for most companies are around 10 percent of total revenue, with and 25 percent of that or more being dedicated to digital, content and website development. If your company does $1 million in annual revenue, then at least $25,000 should be allocated to your digital marketing efforts. If you have not invested in digital in some time, it may be necessary to raise that allocation in year one to bring your company up to current standards.
  2. Consider what is below the surface. A good digital marketing investment will include more than what is just seen by you and your visitors. Consider investing in tools and techniques to help give you better insight into how visitors are using your website and the types of visitors you receive.  Software such as Spokai and Hubspot for marketing automation or HotJar and Kissmetrics for visitor and conversion tracking will help grow and enhance your digital marketing efforts.  Prices for these tools range from $29 per month to thousands monthly, but they should be included as part of your overall spend.
  3. Measure and grow your investment. As you are planning your budget, set specific targets and measurable goals for your digital marketing efforts.  These could include number of website visitors or a specific number of orders or quote requests.  By setting a target, you can establish or come close to determining a customer acquisition cost, meaning the investment you would be willing to make to acquire a new customer.  This will help further shape and define your spend on digital marketing.

Next time you find yourself wondering, "How much should I spend on rebuilding my website?" or "How much should I invest in a pay-per-click campaign?” consider these tips.  With the right direction and planning, the investment you make can provide an exponential return for your business.

About the Author

Paul Chambers | Element5 Digital

Paul Chambers is the CEO and Founder of Element5 Digital, a digital marketing and website development agency in Troy, Michigan, with a mission to craft a better Web. 


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