What should your digital advertising budget be?

June 1, 2022

How much does advertising cost for a business per month?

It is difficult to determine an average digital ad spend budget, as it will vary greatly depending on the size and type of business, the target audience, and the ad objectives. Some businesses may have a small budget of a few hundred dollars per month, while others may have a budget in the tens of thousands of dollars per month.

A good starting point for determining your digital ad spend budget is to consider the cost of reaching your target audience through different ad platforms and formats. You can then adjust your budget based on your business goals and the results of your ad campaigns.

So. How Much Do Companies Spend on Advertising?

There are several factors to consider when budgeting for digital ad spend, including the following:

  1. The Overall Marketing Budget:

    Determine how much you can allocate towards digital advertising based on your overall marketing budget. The overall budget will vary greatly depending on the size and type of business, as well as the industry in which the business operates.

    Small businesses may have a smaller overall marketing budget, as they often have limited resources and may need to allocate a larger portion of their budget to other expenses. On the other hand, larger businesses may have a larger overall marketing budget, as they have more resources and may be able to invest more in marketing efforts.

    As a general rule, it is recommended that businesses allocate a percentage of their overall budget to marketing that is proportional to their revenue. For example, a business with a yearly revenue of $500,000 may allocate 5-10% of their budget to marketing, while a business with a yearly revenue of $5,000,000 may allocate 10-20% of their budget to marketing. Ultimately, the right marketing budget percentage will depend on the specific goals and needs of the business.
  1. Target Audience:

    Consider the size of your target audience and how much it will cost to reach them through digital advertising. One of the easiest methods for determining the cost to reach your audience is to run a test campaign. Conducting extensive market research in order to determine the size of your audience may not be feasible for the size of your company, so one way would be to actually develop a test campaign, have it run for a few weeks and analyze the CPM’s to determine how much it costs to reach 1000 users online.

    Need some help with this? Give us a call and we’ll set something up for you.
  1. Ad Objectives:

    Define your advertising objectives and consider how much you will need to spend to achieve them. What do you hope to achieve with your marketing & advertising efforts? Are we trying to increase brand awareness, drive sales, generate leads, or perhaps a mix of everything? Costs can vary depending on the goals we set out.

    For example, am ecommerce T-Shirt company may be looking for direct sales conversions from a digital ad campaign, but their product retails for $39.99. If a digital campaign spends $40-60 before a conversion happens, this would eat into the profit margins for the company. A digital campaign directly for sales conversions may not be the ideal objective for this type of company.

  1. Ad Platform & Placement:

    Choose the ad platform that best aligns with your business goals and budget. Rates can vary across platforms, including private placements on sites like news outlets and OTT/CTV. Try to determine if there is a minimum CPM on the platform you are about to choose.

  1. Ad Format:

    Decide on the type of ad format that will be most effective for your business, such as display ads, search ads, or social media ads. Chances are, you’re going to need the help of a designer, video production crew, or some other specialist to produce the content in the correct formats you will need. This will have a cost beyond the actual ad spend/media buy.

  1. Test:

    Allocate a portion of your budget for testing different ad campaigns and formats to see what works best. As mentioned above, the best way to determine the actual cost is to directly run campaigns on the platforms. PRO TIP: Test new creatives, targets & locations OFTEN.

  1. Ongoing Management:

    Consider the cost of ongoing ad management and optimization. Digital ad campaigns are not “set-it-and-forget-it”. They require constant monitoring and human involvement to measure all performance metrics and to modify the campaigns as they run in an effort to reduce the overall cost per result.

By considering these factors and setting clear goals, you can create a budget that will help you achieve your business objectives through digital advertising. If you want to take your company to the next level by using an innovative outbound advertising strategy, give us a call:

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