As the economic climate continues to fluctuate, digital marketing has become increasingly important for growing businesses looking to increase their reach.
Many channels make up the digital marketing landscape, from investing in paid advertising to internal social media posting and blogging, which are essentially free.
So, how much do companies need to spend on their digital marketing budgets for 2023?
Why Digital Marketing Is Important
First, let’s look at why digital marketing is essential to any business. The average daily time spent consuming digital media in the United States in 2020 was 470 minutes (seven hours and 40 minutes). This number is expected to jump to over eight hours in 2023.
To stay relevant in today’s modern times, businesses must be willing to pivot and invest in digital marketing. Now is a great time to engage and stay top-of-mind with customers. In fact, an Analytics Partner reports says 60% of brands that increased media spending in the last recession saw more significant ROI, and those that increased spending on paid advertising saw a 17% increase in incremental sales.
What’s the Average Cost of Digital Marketing Spend
With a bit of research and planning, it’s easier than you may think to set a final digital marketing budget, especially for small businesses. And understanding average spending can help you decide if your budget is realistic.
You’ll want to start by identifying all your expenses when developing your marketing budget. Every business has unique needs, and there is no one-size-fits-all. Multiple factors will come into play, including business goals, target audience, and industry.
Looking at the percentage of revenue is the simplest way to break down your marketing costs. The 2022 Gartner CMO Spend Survey shows that the average marketing budget has jumped from 6.4% to 9.5%. Setting aside a small percentage of your total revenue for your marketing budget can go a long way.
Typical marketing budget spending for growing businesses include:
- Businesses under five years old may spend 12–20% of their revenue on marketing
- Expect to spend up to 56% of your marketing budget on digital channels
- And social media ads tend to make up 25% of the typical digital marketing budget
A digital marketing package will comprise multiple channels, from blogs, social media, and email to pay-per-click (PPC) and video marketing. Digital marketing provides small businesses with numerous opportunities to reach their target audience at every budget point.
These channels include, but are not limited to:
- Paid Search: Companies pay search engines to display ads higher in search results to increase traffic to their website. The most common form of paid search is PPC advertising.
- Over-the-Top (OTT): Also known as streaming TV ads, OTT ads are video ads delivered to consumers while watching content on an app or website. Examples include HBO Max, Hulu, Netflix, and YouTube, to name a few.
- Display Ads: Online graphic advertising posted on third-party websites. These ads include static images, videos, banners, text, and audio.
- Social Media Channels: Deliver ads to consumers on social media platforms. They’re a quick and effective way to connect with customers and boost a marketing campaign.
Remember, a small budget doesn’t have to mean small results. It’s all in how you allocate your digital marketing dollars.
Digital Marketing Budget: What to Consider
Average costs are a good starting point when creating your digital marketing budget. But you’ll want to consider several factors when setting up your marketing budget and campaign spending. These factors include:
- Time in the Market If you’re a newer company, you need more exposure to build brand awareness. No one knows who you are yet. If your business is less than five years old, plan on spending a more significant percentage (typically 12–20%) of your revenue.
- Target Audience Before you execute a marketing strategy, you need to know your target audience. Create a buyer persona. Ask yourself where they spend their time online and how they prefer to spend their money. Once you know who your audience is and where to reach them, you can create a strategic marketing plan.For example, if your target audience prefers to spend their time on Instagram and YouTube, invest time and money in creating engaging short-form videos.
- Know Your Industry How a small business allocates its digital marketing dollars is driven by industry, competitive marketplace, and the path to purchase for your target audience. For instance, an e-commerce business that relies heavily on the internet to generate sales will invest more money in its digital marketing budget.Also, some industries have highly competitive keywords that can quickly inflate your PPC budget. For instance, a smaller, local, or regional business can get away with spending as little as $1000 per month. In comparison, a more competitive industry could increase a Google Adwords budget for a small business up to $10,000 per month.
- Embrace Multi-Channel Advertising When you take a multi-channel advertising approach, you can efficiently and effectively communicate your products and services to your audience in their preferred manner.Multi-channel marketing strategies have shown excellent ROI, with one study claiming that multi-channel customers spend two to five times more than customers who buy on a single channel.Additional benefits include:
• Expanded reach and frequency
• Increased engagement
• More impactful messaging
• Increased brand recall
- Social Media Social media is extremely popular with consumers and digital marketers and is one of the most significant factors in digital spending. Instead of advertising on every social media platform, take the time to understand which social media channels your target audience uses to most effectively communicate with them.Once you know which platforms to focus your attention and advertising dollars on, you can begin to create relevant and engaging content for your audience.
How Much Should You Spend on Social Media Marketing?
Many businesses, from small start-ups to growing mid-size businesses to global brands, want to know how much they will spend on social media marketing. The simple answer is it varies a lot.
Are you using an in-house social media marketing team, or are you outsourcing to a digital marketing agency with years of experience? You’ll also have to factor in the size of your business and the suite of services you’ll need.
On average, the Small Business Administration (SBA) recommends spending 7–8% of your revenue on social media advertising.
- For example, if your revenue were $1 million per year, you would spend $70,000–$80,000 per year on social media advertising, which is about $6,000 per month.
Remember, not every social media channel is a good match for your business. So do your research and invest your marketing spend across relevant ads and channels.
How much should you be spending on digital marketing in 2023? Enough that you are achieving your marketing and overall business goals.
While you may be tempted to reduce your marketing budget during uncertain economic times, a strategic approach to digital marketing will deliver positive results. Working with a digital marketing agency, you can decide what strategies align with your budget.
At New Path, we combine creativity with data to help growing businesses achieve their goals within budget. From building digital ad campaigns with the creative you provide to creating a brand-new website with ongoing content creation, we will help you expand your reach while generating revenue.
Identify a Growth Path Forward
Schedule a free consultation to identify opportunities to improve your digital marketing. Consultation includes:
- An Audit of Your Current Digital Assets
- An Overview of Your Competitive Landscape
- A Growth Path Forward
Blog Last Updated on 6 months by New Path Digital