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Why Digital Marketing is an Investment, Not an Expense

March 20, 2015
Rick Iorio

Daily expenses affect the decisions of every business owner. Some expenses are planned, others … not so much. Everything from office space to employee salaries and taxes — and the list goes on, and on.

It’s natural to feel uneasy about adding another expense to your bottom line. Where a lot of business owners go wrong is they apply that same line of thinking to their marketing budgets. Big mistake.

Your marketing budget, especially your digital marketing budget, is not an expense. It’s an investment, and the best way to keep your business growing is to invest back into it.

Here’s why digital marketing is an investment.

If you’re more familiar with traditional advertising mediums like TV, radio and billboards, you might (understandably) be a little skeptical about shifting more of your budget to digital.

The most important thing to remember about digital marketing channels is they can be monitored, analyzed and quantified to degrees of detail that traditional ads could never touch. So, you can easily determine the ROI of each and every single marketing effort to validate the expense.

With real-time marketing data in-hand, you can continue to fund the campaigns that prove most effective, and discontinue the ones that no longer pull their weight.

Most business owners know this to some extent, but don’t quite realize just how targeted tracking can get with digital marketing. Off the top of my head, you can tell how much revenue came from one pay-per-click advertising campaign or one email blast or one blog post, how many times people are visiting your site before becoming customers, where they’re coming from, and what pages they’re landing on. With time, you can even calculate how much money it takes to attract one new, revenue-generating customer.

In the end, every action you take can tie directly back to measurable data, which is incredibly powerful. The ability to track every marketing win and loss — down to the tiny details — helps to ensure you’re only spending your money where it’s most effective, nowhere else.

Setting an Effective Digital Marketing Budget

How do you set a marketing budget that will help you get results?

The first thing to take into account would be your business goals, or Key Performance Indicators (KPI’s). As an unwritten rule, we recommend trying to keep your number of KPI’s to a minimum in any given calendar year.

The more goals you’re chasing, the higher your risk of spreading resources too thin. So pick your most important battles, the ones that will move the needle most effectively, and focus on those first.

With your forward-thinking digital marketing goals in mind, consider what marketing efforts have worked for you in the past, and allocate a portion of your budget to those time-tested strategies appropriately. The rest should be put towards campaigns that will push your new KPIs.

According to a 2016 Gartner Survey:

On average, companies [are] spending 12% of their annual revenue on overall marketing activities, with 57% of companies planning an increase in 2017.

Using this survey data, a quick and easy way to estimate what you should be spending would be:

(~12% of Annual Revenue — Traditional Ad Spend) / 12

A note about ROI:

While digital marketing offers a high level of control, that doesn’t necessarily mean you’ll get immediate results. It takes time for data to collect, to become statistically accurate and relevant, especially when you talk about inbound marketing. On average, it’s good to give any new digital marketing effort 3-6 months to see how (or if) it’s paying off, before reallocating financial resources.

Another thing to consider: Inbound Marketing keeps working for you as time goes on.

You write a blog post and share it on social media or email it to current customers. They find it useful and share it with their friends. It gets ranked in the search engines and drives traffic to your site indefinitely.

There is an upfront investment of time and money, but as time goes on and more people find your content, your return on investment should increase, instead of dropping off.

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