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How Much Should a Small Business Spend on Digital Marketing?

Marketing budgets can be tight for small businesses. More than one-third of them spend less than $10,000 a year on marketing.

Small marketing budgets do not necessarily translate into small results, however. The secret is in how those marketing dollars are allocated.

If you run a small business and are struggling to get a handle on your marketing budget, use the following to help guide your decisions, and don’t forget how useful a marketing partner can be in setting and spending your budget.

Average Marketing Spends: A Quick Guide 

 

Your unique business is likely to have unique marketing needs. However, understanding the average marketing spends for small businesses can help you to determine whether your current budget is appropriate.

When trying to decide which budget to set for your own business, or when trying to evaluate whether you have enough money set aside already, consider the following statistics:

  • The U.S. Small Business Administration recommends that small businesses spend 7%-8% of their gross revenue on marketing.
  • On average, about half of a company’s marketing budget goes toward digital marketing.
  • On average, businesses spend 6.5% to 10% of their revenue on marketing.
  • Social media ads make up about 25% of a business’ digital marketing budget.

Here is what these percentages would look like for a business that earned $500,000 in gross annual revenue:

  • $35,000-$40,000 total marketing budget
  • $17,500-$20,000 digital marketing budget
  • $4,375-$5,000 social media ads budget

Setting a Digital Marketing Budget: Factors to Consider  

Average numbers provide a good rule of thumb when you first begin to set your marketing budget. However, there are a number of factors that can affect the exact numbers you choose to allocate to marketing, digital marketing, and specific types of marketing campaigns.

Your Time in Business  

Newer businesses typically need to spend more money on marketing because they need to build brand awareness of and engagement with their target audiences. No one knows about them yet, and marketing can help them get noticed in their area.

As a result, startups and young businesses of less than 5 years should plan to spend 12%-20% of their gross revenue on their marketing budgets, instead of 7%-8%. This higher percentage will give them the freedom to invest in marketing that gets the attention of their local area and enables them to begin achieving their growth goals.

Your Target Audiences  

Understanding your buyers will help you to decide where to spend your marketing dollars. Create buyer personas. Talk to current and past customers to find out why they purchased from you. Figure out where they spend their time and where they prefer to receive information.

Once you understand your target audiences, and how your business can meet their needs, you can begin creating marketing campaigns that have messages and utilize marketing channels that will get their attention.

For example, say your target audience prefers to watch videos to gather information before making a purchase. You may choose to invest more of your marketing dollars in videos than in display ads in order to reach them. On the other hand, a demographic that prefers to receive email communications may require you to invest marketing dollars in email campaigns.

Social Media Preferences  

Social media is an extremely popular digital marketing strategy. Targeting the social media channels that your target audiences use is an important way to reach them with news about your company.

As a result, you will need to determine where on social media your audiences spend time, and then send marketing dollars toward those platforms. Focus on Facebook, for example, or allocate funds to Instagram, rather than spreading your marketing dollars thin trying to target every social media channel.

Marketing Goals  

When setting your digital marketing budget, you may also want to think about your goals for marketing. Do you want to raise brand awareness? Make more sales? Address misconceptions about your business? Promote a particular discount? Get more visitors to your website? Expand your contact list?

Your goals will determine which marketing strategies you spend money on. For example, if you want to improve your online reputation, you will use different strategies than if you want to increase visitors to your website.

Professional Help: A Smart Approach  

Sifting through the numbers and trends to find the right marketing budget for your business can be difficult. Then, getting the most for your budget can present another challenge.

That is why you need professional digital marketing support in the form of Distinct. We are small-business focused, locally-minded, and experienced in helping small businesses thrive.

Our local marketing advisors can help you to navigate setting your budget and optimizing its effectiveness with tailored strategies and a huge toolbox of services.

Don’t wonder what you should spend your marketing dollars on anymore. Distinct is here to help, and success is right around the corner.

References for Fact Checking:

https://www.business2community.com/digital-marketing/how-much-should-i-expect-to-spend-on-digital-marketing-02335032#:~:text=The%20U.S.%20Small%20Business%20Administrations,was%20from%202016%20to%202021.

https://www.webstrategiesinc.com/blog/how-much-budget-for-online-marketing-in-2014

https://www.commonmind.com/blog/strategy/small-business-marketing-budget/

https://www.entrepreneur.com/article/289364

Distinct helps small business owners handle their digital marketing and business systems. Say goodbye to hours wasted doing it yourself and dollars wasted on the wrong person doing it for you. Say hello to the peace of mind that the Distinct Team has things covered.

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