Marketing budgets are a marketing manager’s best friend. Setting and regularly reviewing your marketing budgets is an essential part of the marketing cycle. Learning how to manage budgets is a key part of the marketing strategist’s toolkit.
The first step in setting up an eCommerce marketing budget is determining what your goals are: Do you want more customers? Better customer retention rates? Once you’ve determined your goals, it will be much easier to set aside money to help you achieve them.
You’ll also need to consider how often marketing reviews should take place: Monthly, quarterly or yearly? Regularly scheduled reviews encourage marketers to critically assess each channel’s performance, instead of simply looking at marketing results as a whole.
In this blog post, we’ll go over some of the basics of creating an effective eCommerce marketing budget.
1. Know your objective
You can’t set a budget until you know what you want to achieve. If you’re looking for instant results, you might want to set high budgets and burn through them quickly to generate quick results. But if you’re playing the long game, your strategy will be entirely different.
Your goals could include:
- Increased sales
- Increased brand awareness
- Increased repeat custom
- Increased order value
In general, the more you spend on marketing, the more money you stand to make. With this in mind, many companies choose to put a percentage of their turnover back into marketing.
This is ideal as it means you can automatically review your budgets every quarter. As sales increase, so too will your budget, but if sales are down, you can tighten your belt on marketing costs.
However, reducing spending when sales are down isn’t always the best strategy, and increasing spend when sales are up won’t always translate to an exponential increase in sales.
Instead, try to think of marketing as an investment rather than a cost. By keeping a close eye on your return on investment (ROI) you can determine if your budgets are appropriate.
2. Calculate the costs of marketing channels
It’s helpful to know how far your money will go on each channel. Some marketing channels will be more cost-effective for you than others. SEO is often considered to be a long-term investment, while PPC and Social Media advertising offer instant and scalable results.
The cost for advertising on all of these channels will depend on the competition. High competition will drive up the price, and operating in a niche sector doesn’t always guarantee you’ll find low competition.
The key to success is focussing on the highly relevant audiences and keywords that are most likely to convert. A good marketing strategy will enable you to spend strategically on the platforms that get the best results. Through regular review of your costs, you can optimise budgets and put more investment into the channels that get results.
3. Determine what you can afford to spend on marketing
When starting out, your budget may be determined by what you can afford to put towards marketing. As you grow, your marketing budget should grow with you, but every penny should still be accounted for.
Calculating your ROI and CPA will help you to understand where this money is going and if you could be better placed elsewhere. Marketing budgets should be flexible and not set in stone.
At the same time as discovering new keywords and audiences to target, you should also be refining your targeting and ruling out certain audiences that aren’t relevant or are unlikely to convert. Excluding negative keywords and audiences is an excellent way to extract more value from your marketing spend.
It’s also worth exploring marketing channels that are more affordable. For example, building an email list might be time-consuming, but once you have a healthy email list sending timely and effective email campaigns is effectively free. Earned social media is also an option if you have a strong rapport with your audience.
4. Decide when to review your budget and strategy
Marketing budgets should be reviewed and adjusted as often as you can afford to. A quarterly review of overall spend will allow you to adjust and pivot your focus as required. This can be enhanced with monthly reviews of marketing performance to determine if the budget for individual channels should be adjusted.
Every budget review should start with an assessment of the past period’s performance and attribution for each marketing channel. Determine the CPA for your marketing in general, and then get more granular to determine the CPA for individual channels and campaigns.
If anything is performing above or below average, find out why. If the reason is obvious and you’re confident you can replicate the results on a larger scale, pull spend from underperforming areas and focus on what works best.
5. Understand how much time it will take for each channel to produce results
Some channels deliver instant results while others require time to see results. Even channels that supposedly offer instant results can take a while to build the data set required to refine your approach.
Cutting marketing spending for SEO because it isn’t performing well as social media after just one month is a short-sighted strategy. Every channel should be given an appropriate amount of time to perform well before cutting the budget.
Many professionals say SEO strategy needs at least six months to find its feet. PPC can take three months to start to perform well. And social media ads should run for around two weeks before switching things up.
6. Consider if any of your channels are underperforming, and make changes accordingly
Reviewing your marketing budgets isn’t always about increasing or decreasing spend. Sometimes it’s about shifting the focus to make your campaigns more effective.
Before cutting the budget from any campaign, explore why it isn’t working and what can be done to improve.
– Consider the time it might take for each marketing medium to start performing well before cutting budgets.
– If any channels are underperforming, review and make changes accordingly. Be flexible with your marketing budget strategy.
– Allow marketing strategies six months before making a judgement on how much is spent in order to be effective.