How to Set a Competitive Budget for Your Search Marketing Program

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1 How to Set a Competitive Budget for Your Search Marketing Program

2 1 introduction As search marketing spend progressively consumes a larger portion of overall corporate marketing and advertising budgets, marketers face tough decisions when it comes to allocation amongst various channels to fuel revenue growth. While determining the right budget for your search marketing program largely depends on your business objectives, there are common trends that extend across both B2B and B2C. In this ebook, we will walk through a framework for developing a sustainable and effective search marketing budget. We ll show you how to: Determine the optimal spend for digital marketing initiatives Designate spend across both search and social channels Build a CEO-friendly reporting model that justifies your spend

3 2 understanding the competitive landscape How much do your peers spend in marketing? What is your advertising-to-sales ratio? Your first step to setting an optimal budget for your digital marketing initiatives should begin with determining the advertising-to-sales ratio in your particular field. Public companies in your industry may release a figure for their marketing spend in their financial statements or annual reports. With a simple calculation, you can identify the percentage of overall revenue this figure represents. If there aren t public reports readily available that relate to your industry, start at an advertising-to-sales ratio of 5%. Then, adjust your projected spend based on the size of your market, cost of media spend, and competitive analysis. You can then learn about how much your competitors are spending, and the speed at which you d like to grow. In the retail industry, companies like Walmart may spend a meager 0.4% of sales on advertising. The sheer size of Walmart turns this seemingly tiny percentage into a significant budget. Walmart s higher-margin competitor, Target, spends closer to 2% of its sales on advertising and marketing. More upscale stores like Macy s, Bloomingdale s, and Nordstrom typically attribute 5% of their budget to promoting luxury items and more expensive apparel. The same kind of ratios can be seen in the car industry (automakers generally spend 2.5% to 3.5% of revenue on marketing), liquor (5.5% to 7.5%), packaged goods (4% to 10%), and more. For businesses that specialize in services, it may be beneficial to set your starting point higher than 5% of sales. For example, if you are a professional services firm, you are more margin-oriented than volume-oriented. This means fueling growth requires more budget spend at a higher percentage of revenue. In particular, young companies must invest more heavily to build their brand in the early development stages. Sometimes this could mean putting down 8-15% of budget or even more when necessary.

4 3 STEP 1: Is your business built on volume or margin? Your second step should be focused on determining if your business is built on a volume or margin structure. Margin If you business is built on margin, you tend to spend a larger percentage of sales on marketing because there is room in the margins to afford it and you are often working from a smaller revenue base. In any case, the question needs to be asked: How do I spend my budget more effectively? Volume If your business is built on volume, you tend to spend a small percentage of sales on marketing because a large revenue base enables smaller contributions to add up quickly.

5 4 allocation of b2b marketing budgets According to a MarketingSherpa study, projections can be made about expected spend per digital media channel. By surveying examples in your industry, you can recognize how your marketing budget allocation may differ or be similar. For instance, B2B marketers expect to spend 11%, 9%, and 7% of their overall budgets on SEO, PPC, and Social Media, respectively. Depending on your company s yearly revenue and multiplying that by 5% to determine your overall marketing budget, the table below indicates how a marketer might spend on various digital priorities: YEARLY REVENUE MARKET SPENDING SEO PPC SOCIAL MEDIA TOTAL 100mm $5,000,000 $550,000 $450,000 $350,000 $1,350,000 50mm $2,500,000 $275,000 $225,000 $175,000 $675,000 10mm $500,000 $55,000 $45,000 $35,000 $135,000 5mm $250,000 $27,500 $22,500 $17,500 $67,500

6 5 Search Marketing Spend Growth Projections According to a Forrester study, there are four important factors that will enable growth in interactive marketing in coming years: 1. Larger digital marketing teams: Marketers now have larger staffs to work on online projects than in previous years, which allows for further creative and technical program expansion. 2. Excitement about emerging media: Compared to the past, marketers now have increased budgets to spend on social, mobile, video, and other elements of new media. 3. Effectiveness of digital media: Marketers have seen digital marketing efforts generate better results over time and now, they can measure everything. This includes extending marketing initiatives into social media and realizing return on engagement (ROE). According to Webmarketing123 s recently released 2011 State of Digital Marketing Report, 68% of B2B and B2C marketers have generated leads from at least one of the three major social media platforms: Facebook, Twitter, and LinkedIn. Furthermore, 55% of marketers have reported closing deals from social media leads. 4. Changing customer conversion path: According to Forrester, making and tracking multiple touch points are now required across traditional and new media channels. Marketers are now focusing on defining and closing the customer loop. Marketers have forecasted that digital advertising is projected to grow substantially in the next 5 years.

7 6 By 2016, advertisers will spend $77 billion on interactive marketing campaigns as much as they do on television today. Across the advertising landscape, marketers are spending less time with traditional media each year while the use of digital media continues to grow. SEO PPC SOCIAL MEDIA MARKETING EQUALLY AMONGST ALL CHANNELS WE DO NOT INVEST IN ANY OF THESE CHANNELS 14.4% 13.9% 11.5% 7.7% 9.4% 9.3% 13.9% 12.2% 11.0% 15.6% 13.9% 8.8% 12.1% 14.8% 18.6% 18.6% 24.2% 25.8% 27.0% 31.3% 29.1% 34.4% 39.2% 38.5% 45.1% Broken down by company size, SEO and PPC continue to lead the way in digital marketing budget allocation 0% 10% 20% 30% 40% 50% ,000 OVER 1,000

8 7 Webmarketing123 s first annual digital marketing survey uncovered supporting evidence across different industries that their budgets for SEO, PPC, and Social Media Marketing (SMM) will collectively increase in HOW WILL YOU ADJUST YOUR DIGITAL MARKETING BUDGET IN 2012? 3.6% 9.3% 4.1% 43.4% 53.1% 50.5% 40.2% 36.0% 60.0% SEO PPC SOCIAL MEDIA MARKETING INCREASE STAY THE SAME DECREASE Search marketing, display advertising, mobile marketing, marketing, and social media will grow to 26% of all advertising spend within the next 5 years. FORRESTER RESEARCH

9 8 While B2B companies tend to invest the majority of their interactive budget in SEO, B2C companies allocate more marketing spend towards paid advertising and social media. WHERE DO YOU CURRENTLY ALLOCATE THE MAJORITY OF YOUR DIGITAL MARKETING BUDGET? WE DO NOT INVEST IN ANY OF THESE CHANNELS WE DO NOT INVEST IN ANY OF THESE CHANNELS EQUALLY ACROSS ALL CHANNELS SOCIAL MEDIA MARKETING 16.3% 13.0% 9.5% PPC SEO 27.8% 33.3% EQUALLY ACROSS ALL CHANNELS 15.0% SOCIAL MEDIA MARKETING 15.0% 8.0% PPC SEO 21.5% 42.5% B2B B2C

10 9 HOW TO BUDGET FOR PAY-PER-CLICK SEASONALITY INTEgrate best practices for spending effectively throughout the year To stay on top of your PPC budget throughout the year, be sure to analyze your website analytics to search for and evaluate seasonal industry trends. Pay close attention to the fluctuations. Export your data into a spreadsheet to make adjusted budget projections and plans for the upcoming fiscal year. Use the formula below to determine your adjusted budget, for each month which better takes into account seasonality.

11 10 what about the holidays? To follow best seasonal budgeting practices, keep your specific holiday keyword terms separate from your regular keywords. Since keyword performance between branded and non-branded generic terms will be drastically different, you will also want to manage these keywords separately. To manage these keyword buckets appropriately, evaluate your historical keyword reports with free Google tools to determine where it will be most optimal to increase or decrease your bids. Google Insights will support your efforts with geo-targeting tips, while Google Trends will help you gauge seasonal lift trends.

12 11 budget management tips To follow best seasonal budgeting practices, keep your specific holiday keyword terms separate from your regular keywords. Since keyword performance between branded and non-branded generic terms will be drastically different, you will also want to manage these keywords separately. To manage these keyword buckets appropriately, evaluate your historical keyword reports with free Google tools to determine where it will be most optimal to increase or decrease your bids. Google Insights will support your efforts with geo-targeting tips, while Google Trends will help you gauge seasonal lift trends. CONVERSION = CONVERSIONS RATE TOTAL CLICKS keep these top tips in mind 1. Don t manage budgets by pausing high spending ads and keywords 2. Pausing keywords can lead to missed conversions 3. Conversion rates and quality scores are not affected by bidding to lower positions 4. Quality of traffic is based on conversion rates and not volume Campaigns that reach their limits early in the day run the risk of losing impression and market share when they aren t being served on the search engines.

13 12 HOW TO TRACK AND BUDGET REALLOCATION utilize attribution management properly to allocate marketing spend To accurately calculate true ROI from your digital media campaigns, you must track your campaigns against one another. Effectively driving ROI means always being able to tie ad spend back to your sales. Valuable tracking tools will give you the insight to make budget and resource re-allocation decisions to fuel those campaigns that generate sales. This will save costs from weaker performing campaigns and boost your most profitable ones at the same time!

14 13 To effectively track and report on campaign ROI, Webmarketing123 has created a home-grown, customized analytics dashboard to display individual customer goals in an actionable view.

15 14 conclusion As the end of each month arrives upon you quickly, compiling your budget for the upcoming quarter must be high on your to-do list. Towards the beginning of a new season, it is a perfect time to set aside dollars for your impending search marketing plans and strategy preparation. Webmarketing123 wants to help you achieve your goals online. Whether it means boosting your conversions, optimizing your ad spend, or engaging with prospects online, we can help you discover proven solutions that are right for your business and your performance goals. If you are interested in a customized digital analysis of your website, please contact us at We will be pleased to help navigate you on the best online track for your business. CONNECT WITH US Webmarketing123.com Twitter.com/webmarketing123 Facebook.com/webmarketing123 Linkedin.com/webmarketing123 Request A Free, Customized Site Analysis Request Now >

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