How to Budget for Digital Marketing

Business-concept,-Business-graph-analysis-report.-Accounting,-Stock,-Tone-color-514719280_2051x1465.jpeg

Let’s just address the elephant in the room. How much should your organization be spending on digital marketing?

I’ll get to that answer in a moment, but let’s first examine why it’s important to budget for marketing, or how you can make the case to your top leadership. For nonprofits, it’s a lot easier to ask for money when someone knows what you stand for, is already familiar with your organization, and trusts you.

Digital marketing allows people to get to know your organization and its values. Digital marketing done right will have a good return on investment. On the other side of the coin, you may need to reach out to the people who need your services—digital marketing it also a great way to find and connect with those people.

So how much should you be spending?
Three percent of your total operating budget, give or take.

A 2008 study by the American Marketing Association and Lipman Hearne found that the average non-profit marketing budget was between two and three percent of the total operating budget.

Non-profits lag behind for-profit companies in spending on marketing. A study by Go-to-Market Strategies suggests that about half of for-profits spend six percent of their revenue on marketing. Another study estimates that it closer to 10 percent for most companies.

John Suart of the Non-Profit Marketer writes, “It is tempting to think that the non-profit world’s marketing and communications budgets should mirror the for-profit world. A case can be made that in fact non-profits need to spend more than for-profits on marketing, not less. However, everything points to the fact that the sector would have little appetite for such a radical increase.”

There are arguments to be made for spending more on marketing. (Like we said above: More marketing can have a direct effect on increased donations and it can help the end users of your organization’s services find you and thus make your efforts more effective.) But it can be difficult for an organization that wants to get the lion’s share of each dollar to the end user to allocate more to marketing. Donors want to fund programs, not promotion.

Let’s talk about what three percent, give or take, looks like in practice. Here are examples from John Suart: If a charity had an operating budget of $500,000, its base marketing and communications budget would be $15,000. If it had an operating budget of $5 million, it would be $150,000.

Once you’ve created your overall budget, you will need to assess how much is needed for specific campaigns and perhaps even specific pieces of content. A video can cost $500, $5,000, or $50,000 to produce. So, make sure you can point to your goals and deliver a return on your investment.

Don’t Get Too Distracted By the Bells and Whistles

The purpose of your marketing is to get real people out in the world to do something. That is its core value. Sometimes one can get caught up in how cool or creative we can be, which is fun, but it doesn’t matter if it isn’t providing results. Legendary ad man David Ogilvy has a maxim: “If it doesn’t sell, it isn’t creative.” It is a good reminder to invest your marketing dollars where they can work the hardest for you, not in the prettiest new thing.

One of the unsexy but totally necessary parts of marketing is distribution. You need to get your message in front of people. Jack E. Kosakowski, CEO of Junior Achievement USA, writes, “If you have a limited budget, don’t make the mistake of spending 90 percent of it on the ‘creative’ and then have no money to distribute it… Be sure to allocate some resources–whether it be a modest budget, in-kind support of ad space, or some combination of both–to get your message distributed to your key audiences.”

Kosakowski celebrates the low cost marketing resources and distribution methods on the Internet including email platforms, digital advertising solutions, social media management tools, analytic resources, and SEO apps. “Be sure to take the time to research these kinds of resources and use them whenever possible. It’s an investment of time, but a wise one for a nonprofit with limited marketing dollars,” writes Kosakowski.

Tips on How to Allocate Your Marketing Budget

How much of your budget should be spent on digital marketing? And on which tactics?

You may have noticed that I keep suggesting that you circle back to your goals. I’m going to do it again: your budget depends on what you hope to achieve and having as complete a vision as you can about what you want to do to achieve it. Adam Fifield, head of content marketing at Leadgenix, writes, “You can’t set your PPC budget without actually thinking about what campaigns you’re going to be running, what they’ll look like, and the price range your keywords might fall in.” It’s true.

You should look at the marketing efforts you’ve made already and see what worked. Analyze past efforts. Fifield writes, “What strategies did you spend your money on last year? And of those, which ones were most successful? Which ones were duds?”

He suggests that you allocate money according to what is successful rather than how much a strategy costs. “Even though posting to Twitter is technically free, if Twitter marketing is working well for you, you want to toss some more money at that initiative,” writes Fifield. He also suggests that you allocate 20 percent of your budget to trying new things.

What are other organizations in your field doing? When you are thinking about allocating your resources, it can only help for you to learn from other people’s mistakes and successes. If you are still using direct mail, while others in your field are connecting online, you may want to try the same thing.

But what is the ballpark percentage of a marketing budget should go to digital marketing? Fifield writes, “Ten to 50 percent of your total marketing budget should be used for digital. Once a digital marketing budget baseline has been established, the budget is divided into four areas: SEO, PPC, social media, and content marketing.”

-

This article is an excerpt from my book-in-progress. For more about the book, check out my "why" for writing it.