How To Allocate Budget For Digital Marketing

October 19, 2022
How To Allocate Budget For Digital Marketing

For the majority of small business owners and startups, knowing how to allocate budget for digital marketing may be a mystery. In fact, one of the most sought-after questions tends to be, “How much budget should be spent on digital marketing?” 

According to most experts, business owners must spend between the ranges of 5-15% of their revenue on marketing, out of which 10-50% of the total marketing budget should be allocated to digital. 

However, since this is such an expansive range, here are six simple steps that narrow down the process and make it easy for startups to determine the most suitable digital marketing budget for their business. 

1. Identify and List Your Goals digital marketing

The utmost objective of every digital marketing strategy is to boost sales. In the short run, you can increase sales by advertising campaigns like Facebook or pay-per-click (PPC) advertisements.

Still, brand awareness and recognition are equally essential if you want your business to grow in the long run. Hence, your digital marketing should be focused on 2 primary objectives:

  1. To increase brand awareness (engage more customers, increase ad impressions, expand social media followers, and get greater content shares)
  2. To boost sales (create a sales funnel, increase site traffic, retarget lost site visitors, and improve conversion rate)

This simple exercise clarifies things and makes you prioritize things. Besides, it helps you think about how vital digital marketing is for your business and what fraction of your total marketing budget you are willing to spend on online marketing. 

2. Examine the Sub-Goals/Tasks digital marketing

In the next step, you can examine your sub-goals and list all the options available to achieve your targets. Of course, the most effective way of doing this is to quantify your tasks and make them more achievable. Here are some examples:


  • Increase social media followers by 25% on Instagram 

Post regular updates, viral videos, and boosted posts.


  • Increase site traffic by 40%

Pay-per-click (PPC) ads, Search engine optimization (SEO), email marketing


  • Increase conversion rate by 2%

Revamp site, create new landing pages, design a sales funnel

This helps you discover the digital marketing channels and activities you can use to accomplish your objectives. Still, you must prioritize your tasks because small businesses cannot target all marketing channels. 

3. Opt for the Best Channels digital marketing

This step will be easy if you have spent on digital marketing before. Just examine the past data to identify what worked most effectively and what did not.

However, if this is your first time, you can do quick market research to discover effective digital marketing channels for your business using three simple approaches: keyword research, competitor research, and customer discovery

4. Determine Cost of Marketing Activities

Once you have shortlisted the most effective digital marketing channels via market research and/or by looking at your previous campaigns, it is time to evaluate the cost. This helps you determine which and how many marketing channels you can invest in.

Although, you must note that having a robust presence in a few places is far more effective and promising than having an insignificant presence on every marketing channel. 

5. Estimate Your Budget Allocate Budget

You can apply any of the following budgeting methods:

Affordable Method

This is the simplest budgeting method which only requires estimating how much you can allocate to digital media. It is a rough estimate that is primarily subjective, so it is not a scientific method. Still, this particular method is suitable for startups expanding into digital media for the first time. 

Competitive Parity Method

This method estimates how much your competitors spend on digital media marketing. Then, you can try to match that number. 

Percentage of Sales Method

This method allocates a specific percentage of the previous year’s sales or the forthcoming year’s expected sales for digital marketing. Input your yearly sales to get a number for your digital marketing budget every year.

Objective and Task Method

Here, you can do thorough market research to identify your goals and decide how much spending amount is required to achieve those goals. This is the most rational method of all. Still, startups and small business owners may lack the resources to do the in-depth research this method requires. 

Once the budget is finalized, you can allocate it to your specific marketing channels and activities. 

6. Evaluate Results Allocate Budget

Depending on your customer’s response, you can modify the distribution of your total budget or different activities. Still, that requires keeping a vigilant eye on the results by continuously tracking your overall performance and holding monthly or quarterly reviews. 

Final Words

The idea of allocating a digital marketing budget is to acquire more sales and enhance visibility. Hence, it’s crucial for you as a business owner to learn how to calculate your digital marketing budget to ensure you allocate the right amount of money and spend the correct amount for your business objectives. 


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