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Digital marketing is increasingly being used to create brand awareness, engage customers, generate leads, and make sales.

Digital marketing is becoming more important as the Internet and access to Internet-enabled devices grows.

Digital Marketing budget covers various categories related to digital marketing, including website development and ongoing optimization, web analytics, paid advertising, SEO, social media, and email marketing. Itemized expenses are totalled monthly and yearly.

Overall, most companies spend between 7-10 percent of their overall company revenue on marketing. This is a general rule of thumb to follow to ensure that spending is enough but not too much.

Of this 7-10 percent allocation, about half or more of that should go towards digital marketing. Many companies fall short of this benchmark, spending only a third of their marketing budgets on digital strategies.

However, with the growing popularity of the Internet, it’s crucial to allocate enough money to advertise business online. There are thousands of leads looking for business online and if enough money is not spent into your campaign, miss out on valuable leads and revenue.

Each year, digital marketing becomes more and more important. As technology continues to evolve, try to put more money into digital marketing efforts than traditional marketing efforts.

This is the Report from Forrester Research and eMarketer showing the estimated allocation of marketing funds offline vs. online and across the digital channels.

In 2021, the average firm was expected to allocate half of their total marketing budget to online.

Search engine marketing will capture the largest share of online spend with online display (banner ads, online video, etc.) taking the second largest share.

Online video will represent the highest growth category, with the anticipated investment more than doubling 2016 numbers by 2021.

Social media advertising investments will continue to grow, with a 17% compound annual growth rate from 2016 to 2021. Social media spending overall averaged 13% of total marketing budget in the February 2020 CMO Survey, marking the second-highest point in their survey history.

Mobile marketing has grown to a point that it’s no longer tracked separately in the forecast and it’s presumed to be considered across all channels.

Digital marketing is pacing at an 11% compound annual growth rate between 2016 and 2021 with the biggest growth occurring in online video.

Investment in paid search, display advertising, social media advertising, online video advertising and email marketing is predicted to account for 46% of all advertising by 2021.

B2B companies tend to be slower to transition to a more digital model, but even they have shown double-digit growth in digital investments, and are likely to show an even larger shift towards digital in 2020 and 2021 due to the current restrictions on in-person events.

What factors determine the contribution to a marketing budget?

1. Company Revenue

At the end of the day, businesses attribute the success of any marketing campaign to the revenue it generates.

But the inverse is also true: the more revenue invested into marketing budget, the more success benefitted from campaigns.

This approach is called a causal relationship and it’s exactly what is the need to continually reinvest a percentage of overall revenue back into marketing spend.

That way, ensure that business continues to generate leads and build new revenue.

And that’s exactly what businesses are doing. According to Gartner’s 2021 CMO Spend Survey, the average B2B business allocated 12.3 percent of their overall revenue to their marketing budget.

2. Position Within Industry

As a general rule, new businesses should invest more in marketing spend than well-established companies.

Steve Olenski explains why over on Forbes:

“Young enterprises, one to five years old, should be aggressive with their marketing tactics. Though these companies are often less profitable than older, more established firms, they rely much more heavily on brand reputation and recognition. A company that devotes more money to marketing is likely to attract an audience faster, gaining the just rewards for its efforts.”

Established companies need to maintain campaigns to keep brand reputation high and fight off competition from rising startups in your industry.

3. Goals

What is it your looking to accomplish with your digital marketing strategy?

The more aggressive your goals,the more you need to be willing to invest in marketing your business.

So How to Calculate Digital Marketing Budget?

First, Determine Annual Revenue

This should be the easy part.

How much money did business make in the past year?

Look at the gross revenue before deductions and allowances – not net revenue – to get the right figure for the calculation.

Then, Research the Cost of Marketing Services

And of course, “cost” was one of the most important factors for businesses looking to maximize their marketing budget.

B2B marketers are allocating more of their budget to labor costs than any other category.

That’s why it’s important to know the most cost-effective route when determining budget.

Established companies with the ability to pump significant cash into marketing may be able to build out an in-house team.

But for most businesses, going the agency route may be the best way to maximize your budget.

Finally, Determine The Right Percentage Based on Industry Position and Goals

According to Wordstream, new businesses should be allocating 12 to 20 percent of their gross revenue to marketing efforts, while established companies should be contributing 6 to 12 percent.

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