It's no secret that digital marketing is essential to the success of any modern business. In 2022, digital advertising accounted for 67% of total ad revenue around the world.
But for businesses that want to earn new customers online at a reasonable cost-per-acquisition, it can be difficult to determine how to allocate a digital marketing budget wisely. Between pay-per-click ads, SEO, native advertising, content marketing, and social media, there are so many options for brands to reach their target audience.
Unfortunately, many of these digital channels are getting more expensive. So how can your business determine where to best invest your digital marketing spend?
Being a good budgeter comes down to choosing the digital channels that bring qualified website traffic and drive the highest return-on-ad-spend. Here are some tips for how to discover what those channels are and how to reach your target audience online at a price point that works for your business.
How to allocate your digital marketing budget
1. Prioritize channels with stronger conversion rates
The digital channels your business relies on will depend on a lot of things. Your industry, target audience, brand awareness, existing lead base, and more will limit the choices your business has for profitable digital marketing.
Still, it’s beneficial to know which channels tend toward stronger conversion rates when budgeting. The channels with the highest average B2C conversion rates are:
- Email marketing—2.8%
- Organic social—2.4%
- SEO—2.1%
- Paid social—2.1%
- Affiliate marketing—2.0%
Email marketing and organic social require a strong email or subscriber list as well as a substantial social media following. If you’re a newer business that hasn’t quite developed those assets, then other channels with lower conversion rates, like SEM (search engine marketing) or display ads, are still good options to start driving clicks and revenue.
It’s important to note that certain behavioral advertising—like retargeting ads—can increase conversion rates across multiple channels. Retargeting ads can lift engagements by 400%, so platforms like Facebook and Google Ads that have retargeting options are often worthy of some of your digital marketing budget.
But keep in mind that higher conversion rates don’t necessarily mean much if you are paying an exorbitant amount to generate those clicks or sales in the first place. Return-on-ad-spend is the most useful metric for determining the channels that are right for your business.
2. Go to the platforms that your target audience is actively using
Effective budgeting also requires a clear understanding of your target audience and how they find products and services like yours. Before you direct your marketing dollars to any platform, you need to make sure your target audience is active there and that you can find them through the platform’s available targeting, whether search, interest, behavioral, or contextual.
If you’re a newer brand or you’re just not quite sure how new customers may find you, consider the following questions:
- How did your current or past customers find you?
- Where are your competitors acquiring their customers?
- Did your current or past customers find you on a mobile or desktop device?
- What conversion action do you want your site visitors to take?
If your business doesn’t have strong analytics, it can be difficult to answer these questions. So before you launch any campaign, make sure you have your analytics fully set up, whether Google Analytics, Google Search Console (GSC), a CRM, or other attribution tool, and that you’re ready to track which platforms actually generate leads or sales.
The reality is, there are learning curves with advertising on any platform. Most likely, your initial campaigns won’t be profitable. But once you start to learn more about your audiences’ online habits, you can leverage that information to make smarter, more informed decisions about which platforms can drive qualified traffic and are worthy of a second campaign, third campaign, and so on.
3. Determine what you are willing (and not willing) to spend
Once you determine the channels that you want to invest in, you need to decide what you are willing (or not willing) to spend to reach your audience there.
Certain channels are far more expensive than others. Organic social and SEO are rather affordable, while PPC (pay-per-click) and paid social can get very expensive. The digital marketing space is incredibly competitive, and as a result many brands end up overpaying to generate clicks for audiences that are unlikely to convert or make a purchase.
Determine what you're willing to spend upfront and then stick to your guns. I have had multiple clients absolutely blindsided by the insane PPC costs for search terms in their industry who maxed out their digital marketing budget anyway buying unqualified clicks. If you don't optimize your PPC campaigns, you'll most likely be unhappy with the results.
For Google Ads campaigns, the Google Ads bid simulator can help you determine an appropriate price for your max bid. At a certain point, increasing your bid will only result in minimal traffic increases, meaning unless you have an unlimited budget, it won't be worth the higher price.
Once you run a few campaigns, you'll be able to direct your budget toward the channels and platforms that work for your budget and have the most positive ROAS (return on ad spend).
4. Balance your PPC budget with an SEO budget
While PPC campaigns can certainly help you drive traffic to your website, those clicks can add up very quickly. In contrast, SEO takes more time, but it can help you generate traffic for the long term by ranking for relevant keywords in your industry niche at a fraction of the cost.
That being said, the right PPC strategies can help inform your SEO. PPC can be a great way to prospect keywords or search queries that are worth targeting through SEO content.
If specific keywords in your PPC campaigns bring clicks that result in sales, lead submission forms, or demo bookings, your brand should try to rank for those keywords organically so you can own that traffic in the long term at a fraction of the cost.
The reality is, SEO offers sustainable customer acquisition for your business in ways PPC cannot. If you direct all of your digital marketing budget towards PPC, you’re just one crisis away from having your website traffic dry up. By balancing out your PPC budget with SEO, you create the foundation for sustainable growth: consistent (and free!) website traffic.
5. Listen to the analytics and iterate, iterate, iterate
Once you have a clearer picture of your audience and start to develop a strong base of leads, you can use that data to spend smarter and target audiences more effectively across your preferred channels and platforms.
Here are just a few ways you can leverage analytics in your future digital campaigns:
- Lookalike audiences in Facebook advertising campaigns
- Interest, demographic, or behavioral targeting across social media platforms
- Google Ads retargeting or the Facebook pixel
- Segmented audiences and automated email marketing
- Related search terms and long-tail keywords in Google Ads or SEO
- SEO tracking and A/B testing in GSC Insights
Regardless of the platforms you use, make sure you set up a mechanism that lets you know how much money you're making versus the amount you're spending on certain platforms. In Google Analytics, the Goal Completions feature can help you with this. And as you're calculating your ROAS (return on ad spend) number, you'll also want to make sure you determine what conversion actions have economic value.
Goal Completions in Google Analytics
For example, B2B brands don’t necessarily generate sales at the moment their traffic converts, so video views, demo bookings, or live chats can still have some economic value in what is a longer, more complex sales funnel.
In general, always keep iterating on your targeting and optimizations. Leverage all of the analytics from your previous campaigns in your next ones, and make sure to use any optimization features as your preferred platforms offer.
Over time, you’ll start to understand where to direct your digital marketing budget, and how to improve your ROAS to a number that is scalable and sustainable for your business in the long term.
