According to a Deloitte report, traditional advertising is expected to have a smaller share of the marketing budget in 2023. Instead, marketers are planning to allocate more of their budget to digital platforms.
It’s true: traditional marketing tactics are no longer enough to capture attention. With the shift in consumer behavior, businesses must embrace the power of digital marketing, and a key ingredient for a successful transition to digital is proper budgeting.
Budgeting ensures that you have adequate funds to invest in digital channels that will yield the best results for your business. It helps you avoid overspending on ineffective strategies and directs your resources towards initiatives (or channels) that have a higher potential for success.
Let’s take a look at six actionable steps to help you allocate your budget effectively for the switch from traditional to digital marketing.
- Assess your current marketing efforts
- Identify areas for potential reallocation to digital marketing
- Define clear goals for the transition
- Determine the appropriate channels or tactics
- Track and measure ROI
- Monitor and adjust the budget as needed
1. Assess Your Current Marketing Efforts
The first step in budgeting for the switch to digital marketing is to assess your current marketing efforts. The aim is to gain a comprehensive understanding of your existing strategies, their effectiveness, and how they align with your overall business goals.
Start with evaluating your current traditional marketing channels, such as print media, television, radio, and outdoor advertising. Analyze the performance metrics and data available for these channels, including reach, audience engagement, lead generation, and conversion rates.
It’s also important to assess the costs associated with your marketing efforts. This includes expenses for creating and placing advertisements, production costs, and any fees or commissions paid to advertising agencies or media outlets.
By the end of this exercise, you will be able to identify which traditional channels are delivering the best results and which ones may be underperforming.
2. Identify Areas for Potential Reallocation to Digital Marketing
Understanding the strengths and weaknesses of your current traditional marketing efforts will help you make informed decisions about optimizing your budget for the transition.
Look into traditional channels or tactics that are underperforming or generating low returns on investment (ROI). For example, if you find that billboards are not generating enough leads compared to their cost, you might want to reallocate that budget to digital channels instead.
The idea is to make informed decisions based on data and performance metrics. By reallocating your budget from underperforming traditional channels to more effective digital channels, you can optimize your marketing efforts and reach your target audience more efficiently.
It’s interesting to note that marketing budgets account for 8.7% of company revenues. Deloitte reports that B2B product industries allocate around 7.8% of revenue to marketing which is similar to B2C services (6.5%) and B2B services (5.9%). B2C product industries allocate the highest amount at 15.1% of total revenue.
3. Define Clear Goals for the Transition
Similar to any marketing campaign, the transition to digital marketing should also have a specific objective. This will provide you (and your team) with a clear direction, helping you align your digital marketing efforts to your broader business goals.
Identify what you want to achieve from the transition – do you want to increase leads, boost brand awareness, drive sales, or improve customer engagement?
Make sure the goals are specific and measurable. For instance, instead of setting a vague goal like “increase online presence”, it is more effective to set a clearer one such as “achieve a 15% increase in online sales within the next quarter”.
Setting clear goals allows you to keep track of how well you’re doing, make smart decisions based on data, and improve performance. Simply put: it helps you understand if switching to digital channels was a good move.
4. Determine the Appropriate Channels or Tactics
There is a diverse range of digital channels available today. How do you identify the ones most relevant to your audience and industry?
Here are a few ways to determine the appropriate digital marketing channels:
- Understand the behavior of your target audience and identify the platforms they frequently engage on. For instance, if you are an HR software business, utilizing LinkedIn advertising can help you reach and engage with HR professionals.
- Research and analyze your competitors’ digital marketing strategies. Study their online presence, the channels they’re most active on, and the campaigns they run.
- Stay informed about the latest digital marketing trends in your industry. For example, if there is a surge in influencer marketing, reallocating the budget to influencer marketing can help you stay relevant and capture audience attention.
- If you don’t know which channels to focus on, get in touch with a digital marketing agency that can give you a headstart and guide you through the process.
Most importantly, evaluate the channels in relation to your specific business goals.
For instance, let’s say you are a cybersecurity company that is looking to build trust and credibility. It would be wiser to allocate your marketing budget to content marketing channels such as the company blog and guest posting as opposed to display advertising tactics which may have a broader reach but often lack the depth and value that content marketing offers.
5. Track and Measure ROI
Now that your goals are set and you’ve selected the appropriate digital marketing channels, it’s time to track and measure the return on investment (ROI) to evaluate the effectiveness of your marketing efforts.
The first step is to define the key performance indicators (KPIs) for each channel. For example, if your goal is to increase online sales, relevant KPIs could include conversion rate, average order value, and revenue generated.
Make sure you set up tools such as Google Analytics and other marketing analytics tools to track and collect data on campaign performance.
Finally, calculate the ROI for each channel by comparing the revenue generated against the total costs incurred. This data will provide you with valuable insights into the performance and effectiveness of each channel.
6. Monitor and Adjust the Budget as Needed
Budget allocation is an iterative process. You need to constantly monitor performance, identify areas of improvement and make necessary adjustments. The good news is that digital channels are relatively easy to monitor and adjust as compared to traditional marketing channels.
As you analyze, look for patterns that indicate successful strategies and areas of improvement. Investigate the reasons behind poor performance – was it due to poor targeting, ineffective messaging, or something else? This will help you make the necessary adjustments like optimizing the messaging or landing pages, experimenting with different ad formats, or refining the targeting criteria.
Strategic Marketing Budgets for a Seamless Transition
Keep in mind that there’s no harm in continuing to invest in traditional marketing – it still has its place in an effective marketing strategy. However, if you haven’t explored digital marketing yet, it’s time to consider reallocating your budget. Take incremental steps, test the waters, and observe what yields positive results.
By following these six actionable steps, you can strategically allocate the right resources to the right digital channels. This will enable you to effectively reach your target audience, achieve your business goals, and ultimately drive meaningful results.