How Much Should You Budget for Digital Marketing

budget for digital marketing ormond beachOne of our clients recently sold their business. I find out one day because I get a call from the new owner. He is asking about the website. It is one that we had built for the first owner. On the call, the new owner explains that he already owns a business like this on the other side of town. And as such, he has a website for that business. He goes on to say his call is just to find out what the cost for the website is. So I go through and explain the site and the costs. Including the budget for digital marketing. I explain how many leads it generates. The value the site creates each month is a surprise to him because he pays more for his other site.

Over the next week or so, every time the site gets a lead, I send it to him. He calls again. This time he is trying to decide which site to keep. Is it better to take down his current site and keep this one? What are we doing? And what is the other group doing? What is “the stuff on the back end” they are talking about on his current site? He is confused because there are a lot of moving parts. So he is asking questions. Which site is working? How much should I spend? So I ask him if he knows the return on investment of his current site? The answer is no, so I ask if he would like to plug some numbers into the ROI calculator on our site. He says yes. So I send him the link along with some info on our services.

What is the right Budget for Digital Marketing?

I would like to tell you he went to the link I sent. Figured out we are a better value. Called us back. Hired us. Fired the other guys, etc. But I can’t. That’s where we are in our conversation. The fact that he was so eager to plug numbers into an ROI formula got me thinking though. How many business owners know the ROI of their budget for digital marketing? Not that many I would bet. And that is too bad. Because with a few numbers you can find the value. And the numbers are easy. Most business owners know them off the top of their heads.

So What are the Numbers?

  1. What does a client spend with you on average (in gross profit)?
  2. How many times a year do they spend it?
  3. How long are they clients?

Why are those three numbers important? Because those numbers will tell you the value of a customer. Numbers alone may seem a little abstract though. So Let’s look at two types of business. One owns a home improvement business. One owns a health based business.

Your Customer Value May Be More Than You Think

The home services is pretty straight forward, so let’s look at them first. The owner gets a call, she sends an estimate and gets the job. She installs the product. The happy customer pays her once. End of transaction. Sure, they may call her again in a few years. For our purposes though, this is the end of their value. She looks at ten jobs and sees that she makes about twenty-five hundred dollars per job. That is her customer value.

What about the health based business? This is the one that may surprise you. Let’s say our business owner is a massage therapist. How much is her client worth? If she charges fifty dollars for a massage, that might be the answer. But most of the time, that answer hides the real value. That’s because if she gives a good massage, the client will return. If she looks at ten clients, she may see that they are worth more than she thinks. Say they return once a month. And they generally come back for 3 years. That client is worth close to two thousand dollars. And her digital marketing only has to bring them in once.

So How Do You get Your ROI for Your Budget for Digital Marketing With That Number?

I’m glad you asked! Go to this page and put in either 1800 or 2500 for the first number. And put in 400 for the second number. You will see that the ROI is 525% or 350% for these customers. That is on a four hundred dollar budget. Those are real numbers. That means if the ads get one new client, it pays for itself for four more months of advertising. If it gets two clients, eight months. Three clients, you get the idea.

So if you are paying for digital ads, use this calculator to determine if you are getting what you are paying for. If you are happy with the number, send a nice note to whoever is handing it for you. If you are not, call us and let us see what we can do for you. I bet we can help.

Thanks for reading.

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