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How much money should you spend on digital marketing for your start-up

A digital marketing plan is essential for any business.

It reaches potential new customers, grows your customer base opens in new window, and may help build brand loyalty opens in new window.

The UK is the largest digital advertising market in Europe opens in new window and was one of the biggest spenders on digital advertising worldwide in 2020 opens in new window.

So, what is digital marketing, and how much should you spend on it?

Digital marketing encompasses a broad spectrum of free and paid-for techniques to reach customers across different marketing channels, including:

Used well, all can be valuable tools to find new customers and engage with existing ones.

For example, social media connects those already engaged with your brand and can expose your business to a broader audience.

According to the Federation of Small Business,  58% of consumers visit a business’s social pages opens in new window before visiting its website.

Read our guide on Twitter marketing tips for a small business opens in new window.

According to Forbes opens in new window, nearly 50% of businesses don’t have a clearly defined digital strategy.

 

What is a digital marketing plan?

A digital marketing plan can help you set out how you communicate the benefits of products and services.

The plan should engage customers, highlight your unique selling points, and deliver a cohesive customer experience opens in new window.

A digital marketing plan can be specific to digital channels, such as search, social media opens in new window, paid ads, and websites opens in new window.

Understanding your audience and the demographics of particular platforms will help you prioritise channels.

Some of the benefits of a digital marketing plan include the following:

  • clarity of strategy and goals
  • get to know your customers better
  • quantitative and qualitative data
  • better budget management
  • clear identification of KPIs
  • set KPIs, and adapt as things evolve
  • measurement of ROI.

Committing your plan to paper may help provide clarity across your business and a strategy everyone can get behind.

Free digital marketing templates are available online, including from HubSpot opens in new window and Hootsuite opens in new window.

 

How to calculate your budget

There is no one-size-fits-all approach to setting a budget.

Start-ups and businesses under five years old may need to spend between 12-20% opens in new window of their revenue on their overall marketing budget opens in new window, while more established companies may need to spend 6-12% of revenue to yield similar results.

Meanwhile, research by Gartner opens in new window found that the average business spends 9.5% of its revenue on marketing.

Budgeting is essential.

It will help you stay on track financially, keep track of the channels delivering the most significant ROI, plan long-term, and set benchmarks and goals.

Read our guide on marketing on a shoestring opens in new window.

 

What digital marketing resources do you need?

Resources include people, technology, and advertising expenditure.

Your website may have a blog platform, but who will write them?

Do you have the expertise inside your company, or do you need to hire a consultant opens in new window?

Budget for the software and services that underpin your digital marketing strategy.

Many platforms for digital marketing offer free versions of their software that may be suitable for start-ups.

Software and services to consider may include:

  • design tools for banners and infographics
  • email marketing platform
  • sales tools such as Salesforce
  • search and web optimisation tools
  • social media management tools
  • webinar software
  • website and web hosting opens in new window.

 

Determine your business goals

How much you spend should align with your business goals.

Before you spend any money, it can be a good idea to know what you want to achieve and set a budget to help you achieve those goals.

Objectives may include getting more sales, capturing marketing data, increasing subscribers opens in new window, boosting brand awareness, or reaching a new customer base.

It’s a good idea to make both goals specific and measurable.

For example, suppose you are looking to increase brand loyalty and engagement.

In that case, you may set an objective to grow your email newsletter opens in new window by a certain amount within a specific timeframe and to improve the Click to Open Rates (CTR) to increase how often customers open and read a marketing email.

 

Match your audience to the channel

It can pay to define who you are trying to reach, as your target demographic can help inform the channel you choose.

For example, Facebook users are 56% male and 44% female opens in new window, and the largest demographic is between the ages of 25 and 35.

LinkedIn is primarily a business platform where millennials dominate (accounting for 60% of the platform’s users).

Read our guide on how to use Facebook for a small business opens in new window.

 

Costs and budgeting by digital channel

 

Social media advertising budgets

Advertising on social media platforms, such as Facebook, allows you to advertise your business in a highly targeted way.

You can set up ad campaigns to target users by age, gender, location, job title, interests, and behaviours.

You can run social media ads opens in new window on platforms such as Facebook and Instagram opens in new window on any budget.

Costs are set by:

  • overall amount spent
  • the cost of each result.

You can control how much you spend based on a bid strategy or let the platform bid for you and spend an allocated budget over a run time.

You can control how much you spend by setting a campaign or an account spending limit.

Social platforms can include estimates of how many people you will reach and the predicted results before you order your ad.

Estimates are based on budget, bid, and targeting.

LinkedIn opens in new window allows you to set either a daily budget or a budget that runs for the lifetime of a campaign. For any ad format, the minimum daily budget to start on LinkedIn is $10.

 

Pay-per-click advertising budgets

Search pay-per-click (PPC) campaigns are often run on  Google Ads opens in new window, Google’s online advertising network.

You can tailor PPC campaigns so that only people searching for products and services relevant to your business can see them.

You choose where your ad appears, set a budget, and easily measure the impact of your ad.

There is no minimum spend for Google Ads, which means it can be inexpensive to start advertising.

Adword works like an auction marketplace, and Google Ads sells website visitors, which you can bid on.

Amongst all the possible variables you can customise, the biggest influence on costs is industry.

For example, the business services vertical (such as legal or accounting services) is one of the more competitive verticals in Google Ads, which generally translates to higher costs per click (CPC) opens in new window.

It can be a good idea to plan how you’ll pay for PPC:

  • budget: how much do you want to spend on Google Ads?
  • bid: the maximum you’re willing to pay for a click
  • spend: how much Google takes from your budget when an ad participates in an auction
  • cost: how much you pay for a click on your ad.

 

Display advertising budget

For building brand awareness, display advertising can be a good option.

Google Display Network opens in new window has a vast network of:

  • web pages
  • news sites
  • blogs
  • video platforms (such as YouTube).

The average CPC opens in new window is $1 to $2 for the Google Search Network and less than $1 for the Google Display Network.

 

Email marketing budget

Pricing varies depending on the number of monthly emails sent and the number of customers on the mailing list.

MailChimp opens in new window, for example, offers four pricing levels, with the free version allowing up to 2,500 sends per month.

 

Useful resources

Start Up Loans has free guides to help your start up with various tools to support your business.

Topics include marketing for business growth and a social media toolkit that includes choosing the right social media platforms for your business and creating a social media strategy.

Register and download opens in new window to access these resources.

 

Learn with Start Up Loans and boost your marketing skills 

Want to market your start-up business? Check our free online courses in partnership with the Open University on effective marketing techniques.

Our free Learn with Start Up Loans courses opens in new window include:

Plus free courses on finance and accounting, project management, and leadership.

 

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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