You’re staring at a spreadsheet, trying to split up your digital marketing budget in the smartest way possible. Facebook? Instagram? Google Ads? SEO? TikTok? We know that feeling. The options seem endless. So where do you even start?
It’s easy to get swept up in the constant buzz of new marketing tactics and channels. The latest shiny object syndrome can lead us astray, distracting from core goals. In our enthusiasm, budgets get spread across too many campaigns like wildfire without focus. The risk is fragmentation – trying to do too much with too little. Staying centred on business priorities provides crucial discipline in this sea of options. Don’t dilute your budget chasing every trendy tactic.
There’s a better way. With strategy guiding budget, you can ignore distractions and zero in on what truly moves the needle.
In this post, we’ll walk through a step-by-step framework for marketing budget allocation tailored to digital channels. Follow along, and you’ll find out more on these topics:
- Map spending directly to overarching business goals
- Analyze historical data to reveal your optimal marketing mix
- Balance brand building with performance marketing
- Continuously optimize allocations based on outcomes
- Apply proven budget frameworks if starting from scratch
With your marketing budget working smarter for you, hitting your biggest growth objectives in the year ahead will be far easier. Let’s dive in!
Step 1: Link Digital Marketing Budget to Business Goals
Our first step is simple but crucial – align your marketing budget allocation directly to your overarching business goals for the period ahead.
It’s tempting to jump right into divvying the budget across specific channels and campaigns. But resist that urge! The #1 move is sitting down with stakeholders company-wide to identify your single most important objectives for the upcoming quarter or year.
Get very clear on the 1-2 big goals that marketing needs to help drive forward. What’s going to move the revenue needle? Where is the growth going to come from? Examples might include:
- Increasing new customer acquisition by 15%
- Growing market share by 10%
- Successful launch of a new product line
- Improving brand awareness and preference
With unambiguous, quantifiable goals like these guiding budget decisions, your marketing mix can then be tailored to hit the targets that matter most to the business.
Spend should ultimately ladder up to fuel tangible business growth – whether that’s more leads, sales, signups, or whatever metric matters most. A budget without tight alignment to goals gets fragmented across too many non-strategic programs.
So fight the temptation to jump straight into divvying the budget. First, you lay the groundwork for budget allocation success by identifying high-level marketing priorities. This step will save you loads of time down the road!
Step 2: Review your digital marketing goals
Now that you’ve aligned macro marketing goals with stakeholders, it’s time to dig into historical performance data for additional insights to guide budgeting.
Sit down with cross-functional leaders and ask probing questions about past campaigns and results. For example:
- Which marketing channels have driven the most valuable conversions and pipelines historically?
- Are there customer segments where our spending is misaligned to opportunity size?
- What major seasonal or event-based patterns emerge that we need to account for?
- Which specific creatives, offers, or pieces of content clearly outperformed?
- What feedback have we gathered from surveys, interviews or reviews?
Then scour your analytics platforms to pull reports on:
- Key metrics like reach, impressions, clicks, conversions, cost per result, ROI/ROAS/profit across channels
- Performance trends over time – major peaks, dips, or plateaus?
- ROI differences across strategies, campaigns, segments
- Cyclical or seasonal variations you need to plan budgets around
The goal is to gain concrete evidence of what has (and hasn’t!) driven results in the past. This data-driven analysis should reveal where you’ve historically gotten the most marketing bang for your buck.
Use those insights to double down on proven winners and pull back on chronic underperformers. Budget allocation is about putting a budget where they’ll have the greatest business impact.
Step 3: Review Previous Marketing Results
With a solid fact base established, the fun part is translating historical data into an optimized budget plan for the year ahead!
Let’s walk through some key ways past performance should directly inform budget allocation decisions:
- If paid social delivered a 20% higher ROI/ROAS/profit than display ads historically, increase its budget allocation accordingly.
- If email is consistently your top lead channel across segments, dedicate a budget to match.
- If lower-funnel retargeting continually underwhelms, consider shifting those budgets to expand prospecting efforts.
- If specific personas consistently have higher lifetime value, align spending to focus on those high-value segments.
- If certain creatives or campaigns chalked up wins, find a budget to double down on those concepts.
Build on what’s working while reducing investment in poor performers – that’s the marketing budget optimization sweet spot. Historical data reveals where to place your next bets.
Seasonal and cyclical swings will also be clear in the numbers. Use that intel to properly align the budget to the right periods. You know which campaigns over-index at certain times of year – plan budgets accordingly.
And don’t forget the insights from surveys, interviews and reviews. How do people feel about the brand experience you’re delivering? Plan budgets to deliver on strategic brand positioning.
Step 4: How to Allocate Digital Marketing Budget if You are Starting from Scratch?
As we’ve covered, relying on historical data is the ideal way to optimize budget allocation decisions. But what if you’re launching a new business, campaign or initiative without previous stats to reference?
In these “starting from scratch” cases, you can lean on marketing budget framework rules as guardrails. Here are two:
60/40 Rule: When you’re just starting out without any data yet, here’s an easy formula: Go ahead and dedicate 60% of your marketing budget to big-picture brand building – boosting awareness, credibility, and all that good stuff. Then take 40% and spend it on performance marketing focused on driving direct sales or conversions right away. Think of it like baking the perfect cake. You need brand building for rich, delicious frosting. But performance marketing adds the moist cake underneath. Use a 60/40 split for the first 1-3 months as you gather initial results and insights. Consider it a testing phase before you optimize based on data.
70/20/10 Rule: Got a little bit of data to work with? Take 70% of your marketing money and pump it into proven winners – the channels already making you money. Next, put 20% to test out campaigns showing some potential. Lastly, put 10% and test new ideas and innovations.
Another approach without past data is borrowing broader industry benchmarks for channel mix and spending. Research standard budget breakdowns for businesses similar to yours. Match those as a baseline, then customize for your needs.
With these foundations in place, you can then iterate based on early results. Continuously track performance across channels and campaigns, then optimize and adjust digital marketing budget distribution accordingly. As you gather your own data over those critical first few months, you’ll be able to pivot spending with far greater confidence. Budgeting frameworks get you off on the right foot when you can’t yet rely on your own learnings.
Step 5: Allocate Budget to Brand/Performance Campaigns
One of the biggest budgeting dilemmas marketers face is finding the right balance between brand-building and performance marketing activities. How much should go toward driving awareness and perception, and how much directly toward lead gen or sales?
There’s no universal perfect digital marketing budget split – it depends on your business model, stage, and goals. But you can use these best practices to guide your brand/performance allocation:
- Early-stage startup? Invest more heavily in brand building and awareness first.
- Growth phase company? Shift more budget to performance marketing to accelerate direct response.
- Examine your data – tilt the budget their way if performance channels deliver the best ROI/ROAS/profit. But don’t go 100% direct response.
- Use 70/30 or 60/40 as a starting point for brand/performance split. Then continuously optimize.
- Map spending to the customer journey – brand at the top, direct response in the middle/bottom. Cover all your bases!
- Leverage earned and owned channels like PR and social media to supplement brand-building efforts.
The goal is to balance long-term brand equity with short-term sales impact for a cohesive strategy. Don’t completely neglect brand building or chase performance marketing at the expense of nurturing your audience.
With the right brand/performance mix tailored to your business needs, you can drive both awareness and consideration KPIs. Continuously assess the data to optimize as you go.
Step 6: Align Tactical Allocations to Goals and Measure Results
The last step is translating your overarching brand/performance budget split into tangible channel and campaign allocations.
For example, if customer acquisition is the priority, invest heavily in channels that will yield new prospects – PPC, social ads, content marketing. If retention matters most, focus the budget on loyalty programs, owned platforms like email nurturing and website experiences.
Keep the end goal top of mind and build budgets bottom-up from there. Continuously evaluate performance and optimize allocations based on what delivers results. Be ready to shift the digital marketing budget across initiatives and entire channels based on outcomes.
When budgeting, marketing tactics aren’t set, and you forget it. They require constant assessment and reallocation to fuel data-driven decision-making.
The Wrap Up
There you have it – an optimized, step-by-step approach to marketing budget allocation tailored for the next period!
By taking a strategic, data-driven approach to dividing your budget, you can maximize the impact of every marketing investment. Follow the steps we’ve outlined here to:
- Tightly align spending with overarching business goals
- Tailor your marketing mix based on historical performance
- Find the right brand/performance budget balance
- Apply frameworks if starting from scratch
- Continuously track and optimize allocations based on outcomes
With your budget fully aligned with strategic objectives, you’ll be armed to accomplish your biggest marketing goals for the year ahead.
Now get out there, get crafty with your budgets, and let the data guide you to higher marketing ROI/ROAS/profit. If you need help with your marketing activities, feel free to contact us here.