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, and may help build brand loyalty.

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

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:

• blogs
• email newsletters
• pay-per-click
• social media.

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 before visiting its website.

Read our guide on Twitter marketing tips for a small business.

According to Forbes, 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.

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

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 and Hootsuite.

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% of their revenue on their overall marketing budget, while more established companies may need to spend 6-12% of revenue to yield similar results.

Meanwhile, research by Gartner 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.

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?

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.

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, 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 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, 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.

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 on platforms such as Facebook and Instagram 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 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, 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).

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 has a vast network of:

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

The average CPC 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, 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 to access these resources.