How Brands Should Allocate Digital Marketing Budgets

woman planning at board

One question eCommerce and consumer brands are asking today is around finding the right budget for marketing. Specifically, what kind of digital marketing budget does it take to stay competitive in the new landscape of always-on digital. A shattered customer journey doesn’t necessarily mean the marketing budget has to stretch farther than before. But what is the right digital marketing budget to drive more sales on and offline?

How Much to Invest in Marketing

It’s often remarked, if only in marketing war rooms around the country, that to stay competitive, marketing requires more budget than most companies are willing to invest. In many cases, marketing is a necessary expense rather than a smart investment. Marketing leaders fight their way into the boardroom to preach the investment value in smart marketing.

But for any companies looking at the way to convince your board to build in a competitive marketing investment, here’s a shortcut formula to be successful in planning the right digital marketing budget.

According to The CMO Survey, marketing budgets as a percent of revenue increased to 10.3%, resetting to pre-pandemic levels. The same report predicts this figure will rise further over the next year to 13.6%.

Experts recommend investing between 5%-15% of the overall company revenue into marketing. Which side of the spectrum depends on the marketing goals for the year and what stage of your business the team is supporting. As a consumer brand breaking into a new category this year, your marketing investment would be more aggressive than an ecommerce brand maintaining status quo. This is a good rule of thumb for digital marketing budget allocation:

  • Budgets for aggressive/high-growth models: 12%-15% overall revenue
  • Budgets for staying competitive: 8%-11% overall revenue
  • Budgets for conservative/maintaining status quo: 5%-8% overall revenue

Digital Marketing Budget Predictions

Marketing budgets have been planned, but how to use that budget is where an agile marketing team can shine. Digital marketing versus traditional marketing has been an age-old battle (since the first Google ad impression was served) of the budget. But as consumer shopping begins and maintains online more than offline channels, the digital marketing investment has taken the lion’s share of the budget. Tracking, agility, full funnel impacts — all of these tremendous benefits to digital marketing give marketers a chance to prove the investment is valuable. Hiccups in data privacy and identity only created a minor blip in the digital marketing attribution compared to its aimless brother, traditional marketing channels.

The CMO Survey reported in February 2022 that digital marketing spending accounts for 57.1% of marketing budgets. And this number will jump by 16% over the next year. This seismic shift doesn’t reflect the reality of the modern marketing team. Digital marketing budgets for ecommerce brands will be far above the 57% average investment.

Solving Digital Marketing Budget Allocation

Now that we’re aligned on how much to invest in marketing and where to allocate budget for digital marketing, which channels deserve bigger budgets than others? The answer: There’s no right answer. Budget allocation by channel depends on a variety of factors. But the biggest one is the ideal customer profile (ICP).

Step one: Know thy audience. The online shopper doesn’t use every online channel with the same intention. Understanding whom your ideal shoppers are and what they do on these digital channels will play a critical role in determining where to invest your digital marketing budget.

Questions to ask your marketing team:

  1. Where do our customers go to research products?
  2. Where do our customers go to find solutions to this problem that we can solve?
  3. Who do our customers listen to? What channels do they use to find influence?
  4. What role of the customer journey does each online channel play for this persona?

These basic questions will elevate your marketing budget conversations to drill down into the right experiments to identify the perfect media mix. Marketing teams should experiment with multichannel plays at different stages of the buying journey to determine how certain channels, campaign messaging, even which creative assets drive the right sales into the funnel. Find a benchmark and experiment.

Modern agile marketing teams will look for new ways to lower the customer acquisition rate through more top-of-funnel brand awareness or identify which channel mix provides a faster velocity from awareness to purchase. Each of these data points will be critical to tie your marketing investment into the business needs.  

Prove Your Marketing Works

How can you guarantee your marketing budget will be approved or increased? Prove your marketing works. Goodway Group’s CEO Jay Friedman wrote the book on how to prove your advertising works. Literally. Get a digital copy of his book and find more tips inside. One of the secrets to this sauce is attribution. While digital marketing budgets are increasing, The CMO Survey reports that data analytics investment grew by nearly 40% over the last year. Marketers are more invested in tying the marketing dollar to the customer journey and post-campaign attribution.

Properly connecting your investment in a campaign to the ringing register is the fastest way to secure the marketing investment for another campaign, another quarter, another fiscal year. When the marketing team can identify the red thread from the visitor to the customer acquisition, the ROI takes the fight to the boardroom. And the C-suite boardroom is never going to argue with positive ROI.

Budgeting for the Future of Digital Advertising

While the future of digital advertising is bright and full of complexities, the foundations remain simple. Plan, perform, review and iterate. By allocating your digital marketing budget to cover the funnel that drives the business, you’ll identify more opportunity to grow the budget with the boardroom. Do you need a partner to help you show the value of digital marketing attribution? Learn more about Goodway Group’s ecommerce advertising experience or contact us for a consultation.