How To Budget For Your Digital Advertising Campaigns
You know the value in digital marketing, but now you need to answer a question that many struggle with:
How much should I spend on social media marketing?
For many digital marketers and business owners alike, one of the most daunting steps of setting up an advertising campaign is creating your digital marketing budget. One of the main questions we receive when helping a client set up a campaign comes in a variety of forms:
What should my budget look like?
How much should I spend?
How much does this cost?
While these are very valid questions for a small business owner or head of marketing to ask, they are a bit more loaded of a question than one might think.
Not to mention you can spend your budget on a variety of different marketing activities like search engine optimization or paid search strategy so you can rank higher in search engine results. It’s essential to figure out short versus long term goals and what the lowest hanging fruits are to achieve the ROI you’re looking for given your budget.
Asking “What should my budget look like?” is like asking a kid in a candy store “How much candy do you want?” The kid’s answer is of course going to be “all of it.” Similarly, an endless budget could hypothetically achieve immense results. But, it’s kind of like throwing money at a wall and hoping it sticks. Our philosophy is to justify all budget allocation with a wise and thought out strategy based on your marketing goals and KPIs.
Asking questions like the below help us get there:
How many qualified leads per month would you be happy with?
What is your price point for your product or service?
Knowing your price point, how much are you willing to spend to get a lead?
Read on for help determining what budget should be set aside for your digital marketing campaign.
Establish tangible digital marketing goals
Most clients come to us with the same goal: to generate more leads for their business. Great. However, everyone wants that. What you need to get started is to arrive at a sustainable and achievable number to set as your goal.
In order to arrive at that number, think about the following questions:
Do you care more about lead quantity or lead quality?
What number of leads would be a ‘reasonable’ amount for you or your sales team to bring in each month?
What are your safety and reach numbers for the number of leads you’d like to receive each month?
What is a CPL (cost per lead) you are comfortable with based on your product or service price point?
Once we learn what you are comfortable with for an advertising budget and what your goals are (within reason), we’ll begin constructing a digital marketing strategy based on the answers to these questions. We will also take into account if you are marketing to other businesses (B2B) or to consumers (B2C), the type of content you have to promote, your target audience, seasonality, and other marketing factors, what your competitors’ digital footprint is, and what platforms you want to market on. LinkedIn, for example, is a more expensive platform than Facebook (with a higher CPC), so we’ll have to allocate a bit more of your budget for LinkedIn. For a review of advertising on different social media channels, check out our Guide To Advertising On LinkedIn Vs. Facebook, Instagram, Google, And YouTube.
Translate your goals into numbers
Let’s look at an example. You are a leading web design company and you want to market your services that typically cost several thousands of dollars. To you, a few highly qualified leads a month would be great because even if you land just one, you’ll achieve ROI from your ad spending. Your CPL might be higher, but you’ll be fine with that because you know that you can sell your consulting services at a higher cost.
Let’s put this into numbers: Our goal is a few leads per month. You’re aiming to achieve a CPL of $200 on LinkedIn. Say we generate 5 leads in our first month at a $200 CPL. This equates to a $1,000 total cost with an average of $200 CPL. Since our CPL and the total lead cost aren’t fully indicative of all of the people who saw your ad but didn’t count as a lead, we’ll need to map back to how many conversations likely occurred and what our conversion rate should look like. If we are shooting for an average conversion rate of 7%, we’d have to have an ads budget of $2,850 in order to achieve a CPL of $200 ($2,850 x .07% = $199.50).
Now, let’s take that same example and reverse engineer it with a CPL of $70 rather than $200. With the same 7% conversion rate, we are now looking at an ad budget of $1,000. So, for this example, the answer to “what should my digital marketing budget allocation look like?” is anywhere between $1,000 and $2,850.
What if I don’t know my goals?
Of course, this is all hypothetical and some businesses might not have the answers to all of these goal-oriented questions. At Llama Lead Gen, we usually suggest spending as little as possible in the first month of your ad campaign. Why? Our philosophy is to take a ‘test and learn’ approach to every campaign. When it boils down to it, every marketing campaign is a test. We've done thousands of campaigns and each one is a bit different: the targeting is different, the product offering is different, the seasonality has changed, etc. There's a variety of factors that play into this. If you need help choosing your target audience, check out our Guide To LinkedIn Targeting.
So, we don’t know what will work until we test. We don’t know how your target audience will respond or how your content will resonate just yet. Now, of course, we do work with experienced marketers and teams who have already been running digital ad campaigns for months or even years and already know their target audience, budget, and CPL. However, most advertisers we work with are either new to the digital marketing game or are experienced but haven’t yet run extensive digital marketing campaigns yet. And we'd argue that even if you are en experienced marketing team that has been there done that, there are always new strategies to test and learn from.
With any new B2B advertising campaign, you’re most likely not going to see significant returns within the first month. For that reason, we’ll want to start off with a lower budget to see what ads work (using A/B testing best practices), optimizations based on our data, what landing pages work, and what creatives and messaging work to turn your campaign into a well-oiled machine.
When can I begin A/B testing? Should I A/B test?
Let’s say you have a lot of creatives, messages, blog posts, product and service offerings, landing pages, and target audience/campaign ideas that you want to test. That’s great, but don’t get ahead of yourself! In order to A/B test, we’ll first want to set up individual campaigns as control groups in order to understand what works and what doesn’t. This will allow us to optimize the campaigns that are effective in months two, three, and onwards.
With that being said, each new creative, subject line, body, landing page, blog post, etc. will require us to create a new campaign or a new ad grouping, each with an individual budget attributed to it so that we can learn from the data we are seeing. For example, if you want to test targeting, creatives, messaging, and landing pages, those are at least four different campaigns or ad groupings. We’ll need to set aside an individual budget for each of those campaigns. The minimum, most likely, is $1,000 for each. So that would be $4,000 just starting out.
The costs associated with managing digital advertising campaigns
Last but not least (and most importantly), most marketers and small business owners forget about the costs associated with building and managing a successful campaign. Now, if you’re doing this yourself, there is no monetary cost (just a big-time commitment! There’s a lot that goes into this as you can see.). But if you want to hire an expert agency, consultant, or freelancer who builds digital ad campaigns for a living, there are certain costs associated with each phase of the campaign. Factoring these costs into the equation, you are likely looking at at least $10,000 or more just to get your paid ad campaigns off the ground, set up correctly by an expert. Of course, it is possible to do it for less, or cut corners, but if you want your campaigns to be set up properly and to deliver the results you are looking for you’ll want to pay for an expert team.
If you liked this article and need help with budgeting for your Facebook, Instagram, or LinkedIn campaigns, look no further than Llama Lead Gen. Let’s chat about your content marketing, traditional advertising, social media marketing, brand awareness goals, and set you up with the right budget based on your marketing goals.