Online Marketing Frequently Asked Questions: How Much Should I Budget for Online Marketing?

by | Sep 25, 2015

Business owners are increasingly recognizing that a strong online presence – and taking advantage of the possibilities offered by online marketing – is a business imperative.
What is driving this realization? Firstly, business owners are seeing that the way prospects buy has fundamentally changed. Secondly, their competitors are already leveraging online marketing.
So it’s no longer a matter of “should I”, but rather about how to get started. This leads to the “how much will it cost” question.

Think Long-Term

To generate tangible results from online marketing, and a positive return on investment, you must think long-term.
Online marketing is about doing the right things consistently, day in and day out, over time. Effectively executing on a long-term approach requires investments in:

  • People
  • Infrastructure/Technology
  • Ongoing Tactics

People

The single biggest investment in online marketing is in human resources. Someone must “own” online marketing to make sure your efforts are relentless and optimized.
Regardless of whether you hire someone in-house, or enter into an outsourced arrangement, you will need to make an investment in people.
Some of the key skill sets required are:

  • Content development
  • Knowledge of search engine optimization principles
  • Social media management
  • Research/analytics
  • Email marketing management

In terms of budgeting, a rule of thumb is that you will add one headcount, or a full-time equivalent, to your annual budget.
The cost of the full-time equivalent, either on-staff or outsourced, will be between $2,500 and $5,000 per month, depending on the amount and type of work required.
Therefore, the first decision you will need to make about being “all-in” is whether you are prepared to invest $30,000 to $60,000 annually to properly resource the online marketing function.

Infrastructure/Technology

Building an online infrastructure is key to long-term success.
Central to that infrastructure is a well-developed website that is optimized for both search engines (being found online) and conversion (building your opt-in database, generating leads, closing sales.)
In addition to a well-designed and structured website, you may need to invest in items such as a marketing automation/email distribution platform, a home page video, or design services for marketing tool templates.
With online marketing, nothing is static; you will constantly refine your online infrastructure. However, the bulk of the infrastructure/technology investments will be one-time and incurred in year one – when you are putting the technologies and mechanisms in place for long-term success.
We typically have our clients budget $10,000 for these one-time items.

Ongoing Tactics

Once the online infrastructure is in place, you will be in a position to “flip the switch” – initiate relentless execution of ongoing activities that will drive website traffic, inbound leads, conversions, revenue, etc.
Examples of ongoing tactics are:

  • Online Advertising (e.g. Google AdWords, Facebook Ads, etc.)
  • Email Distribution
  • Video Production (other than a home page video)
  • Directory Listings
  • Strategic Apps
  • Website/Design Updates

These investments will be required year on year. A realistic annual budget for small and mid-sized businesses for execution of on-going tactics is $10,000 to $20,000.

Return on Investment

If you haven’t yet made a serious effort to capitalize on online marketing, chances are you are starting from behind. If this is the case, don’t expect a positive return on investment in year one. The first year is about putting the people, infrastructure, and processes in place to ensure success over the long-term.
A client we have worked with for the past five years provides an example of a typical scenario. In the first year, investments in online marketing generated an 18% return on investment – slightly better than break-even. During that year, 20% of their revenues were generated from online activity.
Fast forward to the end of year five, during which online marketing investments generated an 800% return on investment and drove 80% of their revenues.
This is a realistic trajectory; break-even in year one while you are building and learning, and then consistent and sustainable increases in revenue and ROI over time.

The Bottom Line

This gives you a good starting point in terms of the investments you will need to make for online marketing success. Ultimately, you hold the red pen – you can defer some of the items or spread them out over multiple years if you want to proceed cautiously.
But you can’t just dabble; you must be committed to making the requisite investments if you want online marketing to contribute to your long-term revenue growth.

>> If you require assistance with online marketing budgeting for your business, don’t hesitate to contact me at [email protected].

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Ben Molfetta
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