We think a lot about digital marketing forecasting at Workshop Digital.
And we’re always keeping an eye on industry numbers and trends. However, as fluctuations in the economic landscape have taught us over the years, the future is not predictable—even in good times. Data tells us that digital marketing budgets are projected to increase more significantly than traditional advertising. But it's equally important to note that disruption, competition, and new opportunities happen quickly. That why it’s important for businesses to be quick on their feet.
So, what’s the best way to forecast and project marketing spend? And how do you as a marketer request and refine budgets at your organization? To answer these questions, we’ve compiled a list of budgeting FAQs from clients and prospects and tips for optimizing your budget to hit customer acquisition cost goals.
Today, we'll focus on forecasting with data—so you can understand what makes a good budget for digital marketing in 2023. The first step in figuring out a marketing budget? Understanding the importance of budgets in the first place and knowing which metrics matter.
What is included in a marketing budget?
Of course, budgeting varies based on the size and longevity of your company. However, it matters just the same. Budgets create discipline and accountability across your marketing department. Somebody is responsible for money going out the door. And you want to ensure you can measure results and hold your organizational accountable.
Well-founded budgets also provide guardrails. They allow your organization to take advantage of new opportunities by remaining flexible, while providing you with some direction. And they give you some sense of prioritization on how to allocate your marketing expenses.
To start with a budget projection, the first thing you must do is understand which metrics matter. What you measure depends on your business objectives. Your goals may include increased online sales, improved lead generation, or any number of things. But you must understand how to measure them. Then, you must know how to gather data to make more informed projections about driving the most impact for your business.
Marketing Budgeting Breakdown
One common mistake we see at this stage is that teams forget to include all their costs in the mix. The all-in cost of a marketing strategy must encompass things that many may not normally consider a marketing expense, including:
- Training for your team
- Software to run campaigns
- Staffing and hiring
- Building out your marketing team
- Partnering with agencies or consultants to extend your workforce
- Ad spend
Ad spend is often the most common expense in a marketing or advertising budget—so you also need consider every analytics and testing tool you’re using to measure and optimize campaigns.
3 Types of Metrics to Consider
Once you consider your costs, it’s time to consider what matters the most to your team. In a perfect world, you’ll measure and optimize for internal conversions and revenue based on metrics that grow your bottom line.
1. Conversion & Revenue
When approaching conversion and revenue data, we’re typically talking in terms of cost per acquisition—or, the amount of money it takes for you to acquire a customer. This metric helps identify how much you need to spend to gain one new customer, lead, or online sale. You know, the important things.
If you can, it’s also important to dig a little deeper and uncover customer lifetime value (CLV)—or, the prediction of profit as it pertains to the entire sales life cycle of a customer. And finally, it’s important to determine return on investment (ROI) and return on ad spend (ROAS) to fully understand how well your marketing program is working.
2. Historical Data & Trends
In normal times, marketing forecasting is influenced by historical trends. You can inform your decisions based on what’s happened in previous years, and factor in the impact of seasonality or other significant changes that you predict will happen again in the coming year. This may include:
- Sales or promotions
- New website launches that could impact performance
- New campaigns in the marketplace that could drive different results or different customers into your funnel
3. Industry & Competition
Finally, it’s important to consider external factors when constructing strategies. This includes industry-specific research or benchmarks from trade groups, associations, or publications. It also involves macroeconomic factors such as a recession or spike in the economy.
While it’s important to be wary of external factors, they should not completely dictate your budgets. You want to get as close to revenue as possible. And your forecast should aim to predict what's going to happen to your business—not what's going to happen to the marketplace.
Ultimately, a smart marketing budget is flexible and elastic. You want to be able to take advantage of opportunities as they arise and when you identify new opportunities.
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