Digital Marketing Budgets
Digital marketing budgets are often associated with competitive negotiations or parsing out individual tools, or aspects of digital marketing (such as websites, SEO, PPC, social media, marketing videos, content marketing, content creation, design, logos, advertising, for example) over achieving long-term objectives (such as the typically-ignored goals of actually growing a business in general or reaching into new markets, not to speak of identifying an ideal market niche and then advertising to that market and adjusting one’s SEO and approaches accordingly).
The Common Problems
Most business owners or entrepreneurs will go to a “free” template builder service such as Wix, Weebly, Squarespace, or one of the many hundreds of others, wonder why nobody is visiting their new website, maybe look at some blog posts on how to generate website traffic, learn about SEO (how you outrank competitors online), then look for cheap freelancers to help them.
Freelancers & Budgets
Freelancers in most cases will conversely discuss creating social media content, cool logos, or some other disconnected aspect of digital marketing, and as the old expression goes “never the twain shall meet.”
The business owner is left with a website that doesn’t attract leads, the freelancer is stuck working with less than ideal clients whose goals are never realized because a) the freelancer doesn’t ask and b) the business owner doesn’t know.
The Catch
The number one stumbling block toward achieving traction in the use of digital marketing is money, specifically budgeting for the results you want to achieve and then working with an experienced professional who can help get you to that point.
What Usually Happens When Struggling Freelancers Meet Inexperienced Potential Clients
What typically happens is business owners look at the “how much” question, asking “how much is a website?” or “how much is SEO?” or “how much is eCommerce?” without first looking at what costly problems digital marketing could solve for their business – such as attracting more pre-qualified leads.
In essence, they go shopping for items rather than long-term solutions, most often based on whoever has the cheapest price for that item.
Achieving specific objectives aren’t in the picture – and that may be because identifying how digital marketing could help solve complex problems can be difficult if you’re new to digital marketing.
The business owner focuses on what appear to be “quick fixes” in the form of video advertisements, the magical social media marketing solution that many business owners see as the alpha and omega of online marketing (but at the end of the day can only distribute what you give it to whomever you think is the right customer for you), or random ads on Facebook.
Freelancers on the flip-side of the equation, want to know what your budget is as a pre-qualifying measure, so they can judge whether or not the potential client is a good fit for them or simply another hobbyist with vague, undefined goals and no established business for them to go to bat for.
This price vs. budget, cheap price vs. achieving goals paradox is where most businesses end up.
Most businesses and entrepreneurs spend years trying to find ways to use “free” templates to generate more sales and improve profit margins, completely ignoring what digital marketing could be doing for them.
They’ll spend tens of thousands of dollars on healthcare, home repair, eating out, going to concerts, putting ads on giant billboards or in phone books, but then balk at investing in modern digital marketing in order to grow a business.
In fact, I’ve met hundreds of business owners and entrepreneurs who were stuck trying to market and grow a business by themselves, for free, or “on the cheap” by themselves for decades.
Most are now long gone.
Being stuck in a vicious circle where you’re always trying to find the cheapest deal and tinkering with a cheap generic template as opposed to solving real problems that are costing you can be exhausting; especially when you consider that problems not solved completely always return.
That’s a rough spot to be in, so most will then decide to simply go with the easiest “free” DIY template builder, whether this strategy helps them or not.
In 20+ years in digital marketing, I’ve never seen this approach help one business yet, and I’ve seen and worked with hundreds.
The Typical Digital Marketing Journey for Business Owners
For those reasons, among others, statistically, most small businesses and nonprofits, those who in theory (and in practice) need the benefits of lead generation that digital marketing can provide the most, are almost always the same business owners and founders who use digital marketing the least.
Under Utilization of Digital Marketing
Some of the reasons why so many small business owners and nonprofit organizations either under utilize digital marketing or fail to engage its use at all are:
- Getting lost in trying to understand technical jargon and Do-It-Yourself procedures while managing day-to-day business operations
- Focusing on pinching pennies rather than investing for growth, perceiving digital marketing as an extra expense rather than as an investment toward sustained, recurring growth
- Not understanding how to budget adequately for digital marketing that can achieve objectives
- Not having clear objectives in the first place
- Outsourcing vital digital marketing project development to neighborhood hobbyists or volunteers who are expected to either work for free or drastically reduced wages that aren’t commensurate to inflation much less industry standards
- The allure of “something for nothing” “free” DIY template generator advertising ploys (you get something for “free,” and then pay quadruple what it would cost elsewhere for piecemeal additions disbursed one by one)
- Not seeing value in digital marketing, seeing it as a fad, or not seeing any immediate need
- Not knowing who their competitors are, or not knowing what larger more profitable competitors are doing to engage more customers
These are many easons for why digital marketing may not work for business owners, with some business owners or entrepreneurs embracing multiple reasons at the same time.
That being said, it’s not casting blame at all, but expressing empathy for their myriad challenges.
There’s an old quote that goes like this: “If you think hiring a digital marketing expert is expensive, wait until you hire an amateur.”
It’s because of that empathy as someone who’s worked for countless “boiler room” marketing agencies, family-owned advertising agencies, freelanced for many as a contractor, and operated one or two of my own, that I see it as important to delve into what digital marketing budgets should ideally focus on firstly, and then secondly, detail what realistic ranges should be depending on size and scope of the business and why.
Thirdly, once those points are defined, I’d like to highlight some ways in which digital marketing can and should achieve lasting results for business owners.
What Digital Marketing Budgets Should Be About
When it comes to marketing, not necessarily digital marketing, it’s almost always perceived as something that is the first to be cut during rough economic seasons (which statistically arise every decade give or take a year or two).
The reason for this willingness to reduce marketing spend (of which digital marketing is a large component) is that it’s often seen as an expense rather than as an investment for which the company gains returns.
That’s a key reason.
If there’s no one specifically tasked with explaining gains and advances into new markets or returns on investment then C-suite management is not likely to see marketing and advertising as something worth maintaining. Usually, they get paid regardless…and the squeaky wheel gets the oil.
And again, since explaining marketing gains associated with success metrics (which we can also call Key Performance Indicators) can be technical in practice and obfuscated by technical jargon or technical processes (such as how SEO coincides with paid advertising across multiple channels) it’s that much easier for executives to zone out and lose interest. Doing so can of course cede any gains made to larger more profitable competitors or more agile competitors hungry to overtake you, but it’s what those businesses do that can react out of fear as much as apathy.
Digital marketing, basically marketing that focuses on utilizing digital tools and services, should be focused on helping a business entity grow, expand, increase profit margins, reach to ideal consumer groups, providing those groups with content they want to learn more about, and devising other ways to reduce overhead costs, cut redundant operations, eliminate waste, and consolidate and combine processes.
When business owners only examine cost they can miss the boat departing the shore for much larger horizons and new lands.
When they hunt for free tools and DIY fixer-upper approaches where disconnected efforts are combined with undefined unrelated tasks, it further dilutes the potential for results.
Digital marketing is supposed to propel a business forward across multiple levels at the same time while also streamlining the way it works; which is why if and when it’s engaged properly, it can’t help but generate positive results…after all, when used correctly it’s automating processes, combining workflow steps, all while expanding scope.
Determine Realistic Budget Ranges for Growth
Realistic digital marketing budgets should be based on the value of solving problems, not how cheap someone can install a generic template.
You can always find something cheaper but you can’t always find someone who can solve problems for you long-term so that they never return.
This is why patients pay doctors rather than negotiate cheap prices or try DIY surgery: they value outcomes over price shopping.
Now, since understanding business problems and then explaining them can be uncomfortable, it’s seldom done, especially to people you may not know personally yet.
Since potential clients can often see no point in explaining business problems to someone they don’t think could possibly solve those problems for them (such as a random freelancer or cheaply-priced template installer), that’s yet another reason digital marketing is often not followed-up on.
But if the business owner believes that their stopgaps can be removed and problems resolved and that the consultant they’re talking with can resolve those issues, they should try to determine what those exact main problems are, how they got to be there, and what could happen…and what their life could be like if their problems were removed permanently. Their business could grow exponentially, they could live a different way.
So, for example, if you’re suffering from an excruciating tooth ache, paying several thousand dollars to a dentist for a root canal is realistic to relieve the pain and then you can subsequently begin to enjoy life again. By comparison, almost every business needs to increase profits, expand into new markets, or gain brand authority, or automate processes that could cut costs (thereby helping them grow faster and easier), but if they can’t see that, they don’t value any solutions, and can refuse to invest to solve problems they can’t define.
You’re not going to be open to investing $3,000 to $5,000 for a solution if you don’t see a problem or don’t know your Customer Acquisition Costs or aren’t committed. But if the problems are real and tangible, it’s another story.
How to Budget
Once we know there are problems worth solving that have real value to the business owner, or a viable path forward toward greater profitability, it becomes far easier to take deliberate action. Investing $3,000 to make back $30,000 in new leads or increased sales a few months later can then be seen as perfectly reasonable. It’s the businesses that can’t or won’t see that that goes under faster. If they can’t compete, they can’t grow, if they can’t grow, they’re moving backward.
Remember, that according to the US Small Business Administration:
“As a general rule, small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing.”
Now, this point, bear in mind, is not my opinion. It’s a statement of fact based on research of business growth for businesses that made it.
Secondly, they’re recommending investing you invest 7 to 8% of gross annual revenue into marketing to keep going at your current rate of growth. If you want to expand that reach and scope, they recommend boosting that percentage to at least ten percent.
Stuck in the Weeds
I’ve probably met more do-it-yourselfers with nothing to show from spending years of their lives chasing “free” tools and generic $20 templates than most, since I’ve been in digital marketing since it began.
I’ve met or spoken with thousands of well-meaning people with ideas for businesses that never came to fruition, thousands of CFOs and CIOs investigating what could be one day if only someone could commit realistically or break through intra-department communications, countless Non Profit Organization founders who have come and gone like watercolors fading in the rain. All of them long since gone, never to be heard from again.
Addressing Real Needs
If they’d had experience managing multi-level marketing campaigns, implementing digital marketing tools and processes, branding, managing teams, coordinating all the seemingly-disparate parts into a cohesive whole, they wouldn’t have needed the assistance in the first place.
Yet most of those business owners and entrepreneurs, most business owners period, go around in circles, never fully realizing the growth value they could experience if they fully committed to their own livelihood, invested as if they were going to place an ad in a local newspaper or radio station for a few years, worked with an experienced professional and planned appropriately.
Many business owners, when it comes to the highly technical nature of digital marketing, and the complex multiple levels of proper implementation, are overwhelmed. That’s perfectly understandable. They may be suffering through denial or simply apathetic.
Why Do They Do It?
The truth about marketing, whether digital or otherwise, or using a “marketing mix” where we combine traditional marketing with digital for the best, most robust outcomes is that until we as marketing experts can help the business owners cross that bridge and guide them through their instinctual desire to price shop around or try to do everything themselves or micromanage, we can’t help them.
We can’t get to work trying to transform the business, leveraging experience for them. We have to get them through the five stages that Dr. Elisabeth Kubler-Ross called the “five stages of grief.”
Five Stages of Denial Most, If Not All, Business Owners Face
Now, yes, those stages of grief and denial were originally meant to explain the grief people go through when they lose someone they loved…but I noticed over time that those stages of grief and denial also applied, maybe to a lesser extent of course, to the push back we digital marketers receive in trying to work with business owners.
Most struggling business owners would stay stuck in those first four steps unless you could explain and illustrate to them how being in this unending cycle was actually hurting them more in the long run…and could eventually sink their business goals.
It usually ends up that way. But it doesn’t have to be that way.
Moving Past Resistance
When it comes to confronting grief over business failure, we have to own our own failures as much (if not more so) our successes.
It’s only by acknowledging what didn’t work and why that we can formulate a plan that avoids what didn’t work, learn from those mistakes without blame, and build plans for moving forward in a different way.
A huge step in that direction is looking at how marketing has changed.
Using Traditional Methods Due to Familiarity
If we look at the very basic step of placing an advertisement in a newspaper, there are few if any newspaper advertising staff who will talk seriously with you if you’re unwilling to invest (minimally) $2,000 to $3,000.
Now, that ad that they run is set to renew every month or two.
If you fail to pay that same price again every month or two, the newspaper advertising person will simply cut your ad.
They cannot and will not ever guarantee results because they have no way of knowing whether or not you’ll respond to phone calls or emails in a timely fashion, how many people will want what you provide or the way that you provide it, and it’s not their business to break down local area demographics beyond only the superficial overview due to variations on business types and behavior of who you may want to reach.
You pay the money, they post the ad. You stop paying, the ad stops. Nobody guarantees outcomes. Sometimes you get a few calls, sometimes not.
It’s a very unreliable and unpredictable way to promote a business but business owners have been paying thousands per month to place ads in newspapers since newspapers began and even though most consumers do not buy physical newspapers any longer, most small business owners still think newspaper advertising is more reliable because they’re more familiar with it.
Similarly there are those who still prefer to invest thousands per month or per year in placing ads in local phone books.
Again, few if any people I’ve ever met still use massive phone books to look up a business when they can just speak a type of business into their smartphone and be shown an infinite listing within seconds.
The phone book company won’t turn away your money, they’ll still charge several grand per month or annually (depending on where you live in the country), cannot and will not guarantee results, and their product isn’t used much any more. Yet people will still do it nonetheless.
This approach might work in small isolated communities with no internet or aging communities unaccustomed to internet use; but it certainly doesn’t fit most of the US or most of the world population. Again, it’s easily $2,000 to $3,000 at the least that could be lost without ever knowing it since there’s no way to track who sees your ad, who needs your services, who may or may not call, and so forth.
Finally Getting Help
If we look at larger, broader markets such as radio and certainly television, you’re now investing several thousand dollars per month, to tens of thousands of dollars, probably on efforts that similarly may or may not deliver. Radio and TV advertisers cannot and will not guarantee results, but are always happy to take your money. They’ll charge you the same recurring fee again soon, and it may or may not result in more leads.
Why Digital Marketing Delivers More & Is More Practical
Taking this to its natural conclusion, even if you were to invest tens of thousands of dollars on billboard advertising, phone book ads, radio jingles, and the occasional TV spot, consumers still expect to see a professional, responsive company website with well-written, engaging content that achieves a high ranking in local Google search results.
Also, paying for ads in more traditional, offline channels don’t make the internet go away. To the contrary, such efforts add more to enterprise-level marketing and advertising scope and budgets. Such investments in advertising should be in addition to and after digital marketing is sufficiently executed and automated, not before and not in substitution of those efforts.
At the end of the day, the goal must be the strengthening of a business, and investing in effective digital marketing that performs according to specifically-set plans and in accordance with thought-out metrics that achieve larger long-term objectives and solve important costly problems is going to deliver more outcomes, more consistently.
That’s why digital marketing investment continues to increase quarterly and will continue to outpace investment in more traditional offline marketing and advertising. Digital marketing delivers more “bang for the buck” than traditional forms of marketing, continues delivering results indefinitely even after you’ve stopped paying for online ads (also called PPC) through the use of SEO, content marketing, and maintaining your company presence online. Investments are a tenth of what you’d pay for traditional marketing, reach more people, reach them more often, more easily, and work hand-in-hand with traditional marketing when executed correctly in a organized manner.
For a tiny percentage of what business owners used to pay for advertising and marketing through the use of phone book listings, phone book ads, newspaper ads, billboard ads, radio ads, TV spots, flyers, hand-outs, and so on, you can get online the right way without cutting corners, establish a firm presence, dominate a local market fairly easily, and expand into new markets.
On top of that you can always bring in more avenues of marketing and advertising later or tweak approaches as you grow. No other form of marketing provides that.
Now that you know how to market, how to budget based on older established paradigms, what stops most business owners from making progress, isn’t it time to give your business the fighting chance it deserves?
Note: View my infographic on how to determine your marketing budget on Behance.