Hey – thanks for sharing a few minutes with me. You can check out my short intro video to the left, or simply dive into the post and get an inside look at how I arrive at online marketing budgets.
Don’t forget to download the Easy Form Calculator at the bottom – it’ll help you crunch the most important numbers to arrive at your own budget.
Barry Edwards 🙂
Finding the optimum marketing budget in your market is the key to beating your competition
As a business owner or marketing/sales director, your priority is to find the most effective marketing solutions for your company at the lowest price… and they should be in that order — “most effective marketing solutions” is top priority as it produces the biggest return on your investment. If “lowest price” is your top priority, you’ll most likely waste valuable time and money.
I primarily market services. And I prefer to market services that bring in over $1000 with each conversion, such as cosmetic surgery, various B2B consulting and personal and professional training/coaching.
Step 1: Establish the value of leads and conversions in your market
These services vary greatly in conversion value. I’ve worked with a plastic surgeon where we’ve established an average value of $3000/conversion and I’ve worked with business consulting services that average over $50,000/conversion (outsourced project management company, B2B investor). It would seem the latter would have a much bigger budget to work with, right? Well, it depends on how many clients they turn over in the same period of time.
(Secret Tip: I’ve included an Easy Form Calculator at the bottom of this article to help you figure out your important Online Marketing Budget numbers. It’s an easy-to-use 1-sheet that will enable you to experiment with your potential marketing budget and expected returns!)
I’m going to use super-easy numbers for my examples, so the process is easy to understand.
If my plastic surgeon treats an average of 5 patients/day, than he’s bringing in $15,000/day, which is $300,000/month and 3.6 million/year. However, my project management company only procures 20 clients per year due to the extensive workload for each, then they are only bringing in 2 million dollars/year.
Each case is different and has to be handled uniquely. However, the budget can be established in relatively the same manner – establishing a great return on investment (ROI). This is what your top competition has done, which is why they’re your top competitors.
I’ll get back to the example above after I dissect the common obstacles that many business owners have with establishing their budget.
Step 2: Avoid the penny-wise, dollar foolish approach
First, I want to address the overall panic that some business owners have when we start discussing the big dollar value of their potential conversions. Many believe that they are going to get charged 10 times the amount as the small dollar conversion business for the exact same marketing package. Not true at all. We’re simply establishing what your competition is working with. Trust me, if hundreds of thousands of dollars are at stake, then your top competitors are putting an appropriate amount of time, money and effort into securing that business.
Yet, here’s the mindset of many business owners: “Heck any 12 year old can create a website. I can get one done on freelancer.com for $400.00″.
“I know they’re going to say ‘SEO’ a lot. The baffle-me-with-your-BS approach. I get spam every week from companies telling me they can put me at the top of Google for a hundred bucks!”
If you’re in this state of mind, you’ll waste $400.00 on a website that will produce no leads and ignore developing quality branding. Today, it takes a lot more than a website to produce leads and when you’re finally ready to take the next step and hire a reputable lead gen marketer, they’ll most likely tell you that they need to rebuild the website with more professional branding and content, easier landing page creation and A/B testing capabilities.
Your $100 investment in an offshore SEO company (companies in the US won’t promise you top ranking in Google for a cheap price because of potential lawsuits) will likely leave you with Google penalties and therefore corrupt future SEO efforts. When you’re ready to take your next step, a reputable marketer will probably recommend securing a new domain rather than building a house on a shaky foundation (penalized SEO).
While you’ve only wasted $500 and a domain name, how much time have you wasted? Two years? How many hundreds of thousands of dollars have you let slip through your fingers in that time? How far behind your competition are you at this point?
A sharp business owner should keep an eye on the potential return on investment (ROI) of his or her investment rather than seeing it as only an expense (in which case, it will be).
Lack of education of present day online marketing tactics
Online marketing technology and techniques have evolved rapidly in the past 20 years. While there was a brief moment in time (roughly 1998-2004) when a good website and decent SEO tactics were enough to get some companies to the top spots of Google, competition has since flooded the internet. Marketers and search engines have become much more sophisticated and social media has forever changed the marketing landscape.
Perceptions vary wildly about the state of internet marketing
The less educated in online marketing still believe only the website is needed while many online marketing professionals today are claiming “the website is dead” in a knee-jerk reaction to easier to build and maintain websites. The reality is that a really good website is necessary as the hub of your marketing efforts, but it’s only one piece of the puzzle.
Proper use of a variety of techniques needs to be pulled together within an appropriate budget in order to maintain a successful marketing campaign.
Step 3: Arriving at your market’s internet marketing budget
I’m circling back to our online marketing budget numbers now. I’m digging deeper with these three varying examples. I’m going to list their challenges and priorities as succinctly as possible in order to give insight into how to calculate nearly any service industry’s marketing budget.
In each case, your first step is to search the competition, decide who you’re aiming to beat and examine their online presence. You don’t want to spend more than you have to on your marketing efforts, but spending less TIME and MONEY on QUALITY marketing efforts will be a waste of these resources.
You must be willing to look at the possible ROI at year’s end… and thereafter!
Putting together a quality lead generating solution for businesses can take anywhere from two months to six months to ongoing. The business owner must be able to evaluate the possible return on the investment by year’s end. Since feeding your marketing channels takes time, you should expect the first year’s return to be less, but following years to be more and more fruitful.
Smaller markets have smaller marketing budgets, but can get positive ROI faster
For more detail on this group, you can take a glance at this article that I wrote about budgeting for dentists and auto mechanics – both of which have conversion values of around $500. I made the case for a $4,000 investment in proper website and Local SEO. In this case, there has to be strict limits on how much ongoing content creation is paid for and a paid ad campaign would have to be lean as well in order for the campaign to remain profitable.
But, since your only competing for clients within a 20 mile radius or so, you’re likely to only have a few competitors. Spend your money on a quality online marketer and you’ll see a great return within six months and beyond.
Priorities: Local SEO, Facebook ads, quality branding on website and consistent on social media. Email campaign if competition is heavy.
Challenges: Posting semi-regular, GOOD content is a challenge at this level as the budget doesn’t support outsourcing. This responsibility usually falls on the owner or a very good assistant – both of whom are usually too busy to sustain it. But most smaller markets will have weaker competition that will make this unnecessary anyway.
Medium markets and conversion values require additional tactics
As for the plastic surgeon marketing budget, if a new plastic surgeon approached me to overhaul their online marketing, I can point to Vanek Plastic Surgery as a very successful example. They were capturing approximately 2 leads/week. I redesigned their (huge) website over a period of six months and dramatically improved their on-page and off-page SEO. EdwardsCom social media partner, Mark Tennant overhauled their social media presence (mostly Facebook). The estimated increase in revenue of their first year was $288,000. It’s safe to say they made an incredible return on their investment with us with us that year. Mark is still under contract for social media marketing and he’s killing it for them.
Priorities: Local SEO is very important. Branding: Website must establish trust and professionalism. Social media presence needs to be taken seriously with regular posting of quality content. Facebook ads usually a must. Google Adwords recommended for many industries at this level.
Challenges: Email campaign, lead magnets and possibly online training are important for establishing/maintaining a good sales funnels. This is usually where the struggles begin with prioritizing these within established budgets.
Larger markets and conversion values – everything goes
Onto the project management company with an estimated $100k/conversion. While that sounds like an insane number to work with, acquiring and converting a lead of this magnitude is extremely difficult – especially knowing that their top competition is putting big dollars into their online marketing. There’s too much money to be made or lost here to undervalue the marketing effort. The smart business owner is going to listen to the potential annual return on a thorough marketing plan and invest wisely (wisely at this scale usually means incentivizing the marketer with a commission).
Priorities: For their campaign to be successful, it requires an incredibly professional online presence (top-notch branding across website and all social media channels) and needs to be fueled with an enticing and well thought out Content Marketing Plan. The CM Plan should position key company players as experts in their field. The company would be wise to also develop a couple levels of online training in order to lead prospects through a sales funnel. This also provides a way to scale the company with little extra overhead (human resources).
Challenges: This level of online marketing requires a dedicated effort. Remember that it takes quite a while to get all the major pieces in order and “fueled” with excellent content. Online training vehicles are probably imperative to both the sales funnel and to scale the company at this level. But this positions the company as an expert in its field for years to come. Done well, the ROI could be mind blowing. The marketing effort should be analyzed regularly and allocating more budget to the most successful endeavors.
UnlockyourFREE Easy Form Calculator!
This one-sheet will help you experiment with your expected investment and profits with your marketing budget.
The final word on establishing your online marketing budget
In the end, a few important questions need to be answered with each market:
- How much can I conservatively hope to get in return in my first year? Subsequent years?
- How professional is my top competition’s marketing efforts?
- How much money do I stand to lose annually by NOT investing wisely in my online marketing?
Each business and market has it’s uniquenesses. I supplied the above examples as I think most companies supplying services will find a lot in common with one or two of the examples. But, please download my Easy Form Calculator to help you get some real numbers together and start thinking realistically about your own efforts.
And don’t forget… it always starts with a good, hard look at your toughest competitor’s efforts!
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