Setting a Social Media Marketing Budget for Your Up and Coming Business
Probably one of the most uncertain things a small business owner can think about is a digital marketing budget. A discussion of this may most likely earn looks of confusion among budding entrepreneurs. Questions and reactions such as “Is that really necessary?”, “Should that be included in the general marketing budget?”, and “I definitely don’t have that” will most likely be present. Most small and medium business (SMB) founders think that a specific amount of funds earmarked specifically for social media marketing is something that only large businesses can afford, and therefore, can have.
The thing about our current situation now is that social media marketing would account for the biggest marketing item companies would spend on. After all, not a lot of opportunities for events, print ads, and outdoor advertising are available for marketers to pour money on, which leaves us with online marketing, with an emphasis on social media. Besides, that’s where the public is in these “stay at home” times. With everyone spending countless hours on social media, it is very wise to mindfully strategize and establish a budget particularly for social media.
Note the cost of advertising
The primary reason for advertising or marketing on social media is to generate leads for future customers. So, the question now is, how much will acquiring one customer cost? With this question’s guidance, you can then be led to how many customers you can expect with the money you are willing to spend. You may check this through Google’s Keyword Planner, which will give you information on the average cost per click on the keywords your business is searched on that will most likely become customers from mere web browser users. If your targeted keywords cost a low CPC, it means that you can get results even with a small budget. But if your CPC is high, as in at least $10 and above, then prepare to shell out more if you are serious in upping your social media marketing game.
Your ad position and your cost per click are determined in part by the competitive landscape and in part by your own maximum bid (the max amount you’re willing to pay for each click) and Quality Score (a measure from 1 to 10 of how good your ads are).
How much do you earn per customer?
Another method of getting a feel of how much your social media marketing budget should be is by looking at revenue per customer, or in layman’s terms, how much you will earn for every person you’ve converted into a customer through your marketing efforts. If you have a low revenue per customer figure, then you will need to look for cheap ways to get these customers. On the flip side, if you will be earning lots of money from every customer you get, then you will be expected to shell out more on customer acquisition through socmed marketing and still recover your cost / have a good ROI.
Obviously, the goal here is related to the earlier point – a lower cost per acquisition (CPA). If it takes only a few dollars to get a customer, then the value of that customer increases as the revenue you got is above the cost you spent to acquire him/her.
One way to better appreciate the value of religiously tracking cost per acquisition is by comparing it to another marketing metric called customer lifetime value (CLTV, also abbreviated as CLV or shortened as LTV for lifetime value).
How much are you spending versus your total earnings?
Answering this question will allow you to assess with a level head how much you need to spend based on your company’s size. Take note that most marketers from around the world set aside an average of 8.6% of their revenues for social media marketing. If you want higher growth, you may consider following their example, as it has been seen that companies with lower growth tend to underspend on socmed advertising.
Most small businesses aren’t going to hit a significant number of users, especially on platforms like Facebook, without coughing up some money.
Getting expert advice for your digital marketing efforts need not be expensive as well. Get in touch with us and we’ll help you strengthen your social media marketing strategies within your budget.