How Much Should I Be Spending On Digital Marketing?

As we approach the end of the year, it’s almost time to start creating your budgets for 2023. One of the key areas for reflection for any eCommerce owner is their digital marketing spend. In this blog post, we’ll go over the leading strategies for creating a digital marketing budget and the average spend for social media, email marketing, paid marketing, and search engine optimizations for companies of various sizes. 

Digital marketing is one of the most important aspects of any eCommerce business. It’s how you reach new customers, grow your brand awareness, and increase sales. But with so many different digital marketing channels to choose from, it can be challenging to know how much to spend on each one.

General Guidelines For Digital Marketing Budgeting

The good news is that you can follow some general guidelines to create an effective digital marketing budget. Here are a few things to keep in mind:

1. Company size: The amount you spend on digital marketing will vary depending on the size of your company. A small business might only need to spend a few thousand dollars per month, while a large enterprise could easily spend millions.
2. Goals: What are you trying to achieve with your digital marketing budget? Are you looking to increase brand awareness, drive traffic to your website, or generate sales? Your goals will dictate how much you need to spend.
3. Target audience: Knowing who your target audience is will help you determine which digital marketing channels to focus on. For example, if you’re trying to reach millennials, you’ll want to focus on social media platforms like Snapchat and Instagram. Whereas if you’re trying to reach baby boomers, you’ll want to focus on channels like Facebook and LinkedIn.
4. Competitors: Keeping an eye on what your competitors are doing will help you set a realistic budget for your own digital marketing efforts. If they’re spending thousands of dollars on paid advertising, you’ll need to make sure you allocate a similar amount to stay competitive.

Strategies For Creating A Digital Marketing Budget

Now that we’ve gone over some general guidelines let’s take a look at some strategies for creating a digital marketing budget. 

• Start with a percentage of overall revenue: A good place to start is by allocating a certain percentage of your overall revenue to digital marketing. According to BigCommerce, economists debate over the exact percentage, but in general, most small businesses allocate between 7 to 12 percent of their total revenue to marketing Then, as your business grows, you can increase your budget accordingly.
• Calculate the cost of customer acquisition: Another strategy is to calculate the cost of acquiring new customers (CAC). This will give you a good idea of how much you need to spend on digital marketing in order to acquire new customers. To calculate your CAC, simply divide your total marketing and sales expenses by the number of new customers you acquired in a given period. For example, if you spent $10,000 on marketing and sales last month and acquired 100 new customers, your CAC would be $100. 
• Use the 70-20-10 method: Another common method for creating a digital marketing budget is the 70-20-10 method. This involves allocating 70% of your budget to proven strategies, 20% to things on the horizon (ex: a new service or product line), and 10% to new and innovative strategies that will help you differentiate yourself from the competition. 

Average Digital Marketing Budget by Company Size

Once you have a good idea of how much you need to spend on digital marketing, you can start allocating your budget to the various channels. 

According to The State of Marketing Budget and Strategy 2022 from Gartner, the allocation of a marketing budget should follow the following pattern:

• Website — 10.1%
• Email — 9.7%
• Mobile — 9.7%
• Digital Ads — 11.2%
• Search Ads — 9.7%
• Social — 11.3%
• SEO — 10.5%
• Offline Ads — 9.9%
• Partner/Affiliate — 9.4%
• Events — 8.4%

However, the actual amount you need to spend on each channel will vary depending on the size of your company. For example, a small business might only need to spend a few hundred dollars per month on SEO, whereas a large enterprise could easily spend tens of thousands. 

Here’s a breakdown of how much you should be spending on digital marketing based on company size: 

• Small business (1-49 employees): $9,000 – $10,000 per month
• Medium business (50-499 employees): $11,000 – $25,000 per month
• Large business (500+ employees): $25,000+ per month
• Enterprise: $100,000+ per month

Of course, these are just averages, and you’ll need to tailor your digital marketing budget to fit the specific needs of your business. 

Final Thoughts

Creating an effective digital marketing budget can be a challenge, but it’s important to make sure you allocate the right amount of resources to your goals.

By following the general guidelines and strategies outlined in this article, you’ll be on your way to developing a budget that will help you achieve your business goals.