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Marketing 101: How to set a digital marketing budget

So what IS Digital Marketing? These words and “services” get thrown around a lot, but the truth is it’s very simple. Digital Marketing is anything a business can do on a digital platform (usually the internet) to try and promote their products or services and reach new and existing customers. The real question isn’t “what is digital marketing” it’s “what should my company be doing online and how can it help our bottom line”. Well if you have asked yourself that question then you have come to the right place for answers. In this series we will break down the different online platforms that are most successful and most popular and explain how each one can be used to help your business reach new customers and grow your revenue. 

Setting your digital marketing budget.

Identifying your opportunities and goals will help you understand what level of investment will be required. Companies who give arbitrary canned numbers for digital budgets aren’t true consultants and most certainly aren’t experts. Ask any potential provider for a digital strategy and recommended budget and if they don’t use substantiated analytical data in their proposal it might be time to move on. 

Most companies have spent long hours working through their finances to come up with their annual budgets. Most companies also skim past the part of the budget that deals with marketing and business development. That means that when business slows down or growth becomes stagnant, they seldom have a plan for how they are going to fix the problem. Enter the crushing wave of advertising sales people who are chomping at the bit to tell you all about how their company can make you a millionaire for $299 a month. While there are certainly some great advertising programs out there that have low price points, it is critical that business owners understand the fundamentals of creating a real marketing strategy and budget. Let’s dive into what it means to have a marketing strategy

So, I can just start doing some mailers, or run a TV or Radio campaign, or I could even throw some money at Pay Per Click and all my problems will go away, right? Wrong. You should know exactly what assets you have, how they provide to your bottom line, and what you need to do throughout the year to maintain them and advertise accordingly. Companies who wait until they are in trouble financially to invest in their marketing usually don’t have the resources or confidence to make the impact they need. That puts them in a compromising situation that can lead to serious financial decline and even going out of business. Before the start of each fiscal year you should talk with your marketing consultant and develop a plan based on the size of your market, your goals, and your financial capabilities.

Your Market

Let’s use a Real Estate Company in Denver, Colorado as our example for how to create a marketing strategy. The company has a decent website, a strong following on social media, and has been doing mailers and radio advertising for 10 years. They have seen a significant decrease in their annual closings and want to build a comprehensive digital marketing strategy to grow their brokerage.

There are roughly 29,500 searches, per month, for keywords associated with a Real Estate Brokerage in Denver, Colorado. Paid traffic, which represents about 30% of searchers that can be acquired, is roughly $1.15 per click. Using a formula we can determine that the total available market is roughly 1.4 million consumers a year and has a total investment market of around $4,900,000. That gives us a “research acquisition” of around $3.50. Using a ratio of 50:1 for our research acquisitions to generated leads, we can say that it costs roughly $175 to generate a lead. If the closing ratio on generated leads is 5:1, or 20%, then we can plan on a $875 cost of client acquisition. If the average home value in the area is $300,000 and the general commission is 3.5%, the earnings would be $10,500, giving us a 12:1 return on investment. Now you know your market. Let’s talk about goals.

Your Goals

So, how much do you want to grow this year? What do you need to earn in order to be profitable? What do you need to earn to expand your brokerage? These are very important questions that you should be asking. Your strategy will be totally based on what you look to accomplish each year. Let’s say that our brokerage wants to earn $5,000,000 this year in profits. That is a great goal and, based on the size of the market, should be fairly easy to obtain. If the company operates on a 75% profit margin, earns $3.67 million organically, and has a 6:1 return on investment in their digital assets, how much do they need to invest to hit their goal? They need to earn an additional $3 million from their marketing efforts to hit their goal which would give them an investment of $250,000 in their digital marketing.

Setting a Budget

So, now we know the market and we have identified our goals and even have a round figure target for our budget. But, that doesn’t mean we just give a quarter of a million dollars to the internet gods and hope things work out for the best. This is when having a true digital marketing expert and consultant comes in real handy. 

After reviewing the market and looking at the consumer behavior models and researching the search and social analytics, an experienced digital marketing expert consultant would most likely give a breakdown that looks similar to the following. 
“Based on the low levels of competition in the bid ranges and the volume of available search traffic on search engines like Google, we recommend a monthly Google Ads Budget of $8,833 for market saturation. Based on the range of keywords and key phrases, a dedicated search engine optimization budget of $10,000 would be a highly competitive approach. While social media in this market is highly competitive and saturated, the remaining $2,000 of monthly budget would best be spent on social media impact campaigns that can continue to support your audience and promote your listings. This strategy is well researched and supported by data and we are confident that by deploying this strategy you will hit your revenue goals for the upcoming year.”

I’ve had several companies tell me they can get me to the top of Google for $500 a month, why pay more?

If you have been told by ANY company that they can guarantee you positions on Google for any set price in any set amount of time that is a huge red flag. Because Google uses so many factors in their ranking calculations, and because they are constantly changing them, the reality is that no SEO provider with integrity would make those promises. You should be looking for a provider that promises reporting as evidence of their work, reasonable terms and pricing, and sets targets based on traffic. 

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