7 tips to create an effective digital marketing budget

David Pagotto

Published on April 22, 2022


The strength of your digital marketing strategies can determine the success of your business. You need to invest in strategies with a high ROI to rake in more profit. But you can only do this with a well-designed digital marketing budget.

A digital marketing budget helps you allocate funds to marketing expenses and strategies to increase your revenue. You need to create one every so often to keep your marketing wheels spinning.

Read on for tips to create an effective digital marketing budget.

1. Document the sales cycle

A sales cycle or funnel is the process your prospective customer goes through before buying from you. You need to understand the steps in your sales cycle before budgeting for your digital marketing needs. Boost every sales cycle stage with a good marketing strategy to convince potential clients to buy from you and become regulars.

Setting up your sales cycle gives you a clear idea of where you'll spend your marketing money and how you need to spend it to get a good return on investment.

Your sales funnel should have the following four main stages with examples of the digital marketing material you should use.

Step Digital marketing material
Awareness Ads, landing pages, video content
Interest Blog posts, social media content, outreach emails
Decision Webinars, videos, tutorials
Action Freebies, discounts, testimonials

For example, Basecamp’s sales funnel features customer testimonials prominently at the decision stage. These help to earn their prospective customers’ trust and spur them to the next level.

Image source: Basecamp  

You need marketing strategies that help your prospective customers move to the next stage. You can use PPC ads (combined with personalized landing pages for each user), social media ads, email, and video marketing strategies.

Assess the performance of each strategy at each stage and decide which level needs more money in your digital marketing budget.

2. Identify your costs

When making your digital marketing budget, you should consider other aspects of your business that require your financial input. Depending on your figures, consider the amount you're willing to spend on your marketing budget and how sustainable it is.

You also need to understand how much it costs to implement every marketing strategy you make for your business. Creating a marketing strategy is one thing; making it work for you requires more than financial input.

Here are some factors your budget manager should consider when making your digital marketing budget.

  • Cost of hiring people (salaries, benefits, non-monetary needs). For example, you may need to hire an SEO specialist to build you content. According to payscale.com, the average salary for an SEO specialist is $48,216 per year.

  • Digital marketing campaign costs. According to expertmarket.com, a social media campaign should cost between $4000-$7000.

  • Miscellaneous costs.

Including these costs helps you create a digital marketing budget with a maximum ROI. You'll know exactly how much is spent on each strategy and how much it should rake in if it works well. You'll avoid extra costs that could deviate your budget implementation with such figures at hand.

3. Establish your goals

According to CoSchedule, marketers who set clear goals for their businesses are successful in their marketing ventures. Having clear goals for the year helps you prioritize and have an organized budget.

Image source: CoSchedule

The first step towards establishing your goals is understanding why you're in business. Remind yourself why you started your business and what you hope to achieve.

Ask yourself why you need a digital marketing budget. What do you hope to achieve with the budget, and how will it benefit your business?

You could need a digital marketing budget to create brand awareness, boost content marketing, generate more leads, maximize your ROI, boost your sales or gain more subscribers. Whatever your reason, be sure that you have it in mind when preparing your budget.

Having specific SMART goals in marketing will help you articulate your budget. It'll help you focus on the areas that need more attention and help you decide which areas you need to remove from your budget.

You also need to identify a market for your brand. Assess your products or services, and compare them to your competitors'.

You need to do a competitor analysis when planning your digital marketing budget. Who are your competitors, and how do they perform? Research the marketing strategies and content budgets your competitors have. You also need to know which strategies work for them and which ones don't.

Craft your digital marketing budget with a clear image of what you want to achieve and a clear strategy of how you'll achieve it.

New call-to-action

4. Review your options

There are so many digital products your business could use to market its products. However, you can't apply all of them blindly and assume that they'll promote your brand effectively. You need to assess the available options and decide which ones work best for your business.

Understand your business objectives and choose the options that help you meet them. For instance, if you're selling gym equipment for men, your target market is men. Find out which digital marketing solutions appeal to your audience and capitalize on them.

After picking the strategies most appropriate for your business, understand how much each strategy will cost you. Based on the price tag of each strategy and its appropriateness for your audience, you can allocate your budget.

5. Review your past results

The only way to a bright future in digital marketing is to assess your past and improve it. Assess the strategies you have used in the past and their performance with budgeting tools, then decide if they're still viable for your business.

Here are some of the questions you can use to evaluate the strategies you've used in the past:

  • What strategies worked in the past?

  • What strategies didn't work?

  • Which channels drew the most traffic?

  • Which ads generated the most leads?

The channels that worked for you in the past are more likely to work for you now. They've already proven their effectiveness. You should give them priority when allocating your budget.

Groupon is a leading company that has used an email pop-up on its homepage to entice its customers. The pop-up offers a discount for new subscribers. They have used this strategy for years.

Image source: Groupon

If you identify strategies that failed you in the past and still believe they could help your business, study what made them fail. If you choose to keep them, allocate some money to them. However, if you've used these strategies repeatedly with no success, it's time to drop them.

For instance, if you've used social media marketing for months and still don't have a good ROI, you need to reassess your social media strategy and see why it isn’t effective in generating leads.

The ROI attached to each channel and strategy you've used in the past is the pass mark you should consider when deciding which ones to keep and which ones to drop.

6. Allocate your budget

How much money do you intend to spend on digital marketing?

This question should guide you as you allocate funds to your digital marketing strategies.

The US Small Business Administration recommends that businesses use 7-8% of their net profit if they're making at least $5 million in a year. Your marketing spend should be anywhere between 7-10% of your net profit, depending on how much you make.

After settling for all the strategies you'll be using, allocate some money to each. Give priority to strategies that have worked in the past. Allocate the least revenue to the strategies you've tried and failed in the past.

You should follow the 70-20-10 rule when allocating money to your strategies. 70% of your budget should go to strategies that work for you. Spend 20% of your budget on the new strategies you’re introducing to your business. You may spend the remaining 10% of your digital marketing budget

to experiment with new strategies you find along the way.

Align all tactics to your business goals and objectives.

Remember, no single tactic works for all businesses. Your strategies will differ depending on your industry and expertise.

You can only cater for expenses you can afford. Always work within your budget so you don't end up bleeding out your business.

7. Set aside a part of the budget for experimenting

Even after selecting the marketing strategies your business needs, you must keep experimenting with new strategies. Marketing is an ever-evolving dynamic, and you need to stay in touch with the new trends in the industry. You need to have some money set aside to try new marketing strategies.

Keep studying the marketing sphere in your industry and know the new trends. Study your competition and know the strategies they use that make them better than you. These are the strategies you should experiment with and see if they work for your business.

Experimenting means that some strategies will work, and others will fail. However, you'll not know which ones are good unless you test them. Only put forward the money you're ready to lose without affecting your business finances.


Your digital marketing budget should support your marketing needs and set up your business to increase the net profit. However, allocating funds to marketing can be tricky if you don't have a clear strategy on how to invest.

Before settling on a budget, consider the stages in your sales cycle and determine which areas need a financial boost. You should also understand the overall costs of your strategies, your business goals, and the different marketing options available. You should also review your past results and determine what worked and what failed. This should guide you when allocating money for your marketing needs.

Remember to set aside some money for experimenting. As your business grows, you might have to change the digital marketing strategies. Allocate some funds into experimenting with new marketing strategies.