SME Digital Marketing Budget
The first order of business when allocating a digital marketing budget for an Australian SME is to ask a straightforward question: what can you put in without the bank account being left flat as a pancake? The answer for most is to put aside 5% to 12% of annual revenue for all marketing and have some of that go to digital.
Do not mistake this for some edict from Canberra. It is merely a planning range. An upstart business wanting to grow fast will outlay more than a well-heeled trade operation that has no trouble with referrals. In the end, the budget you put together will be dictated by your margins, sales cycle, competition, customer lifetime value and how well you can pursue leads.
I am Scarlett Fairchild and running an online journal has taught me that the best channel is not necessarily the one that costs the least. You might have an afternoon to spare on a social media post at no charge, but an email done right in twenty minutes can be bringing in sales for months. You have to find where your customers are paying attention and measure the outcome.
Set A Sensible Starting Budget
An Australia SME marketing plan should be based on revenue, not some figure you see on a rival’s site. Take your annual revenue and pick a percentage for total marketing, making sure to ringfence the digital side from offline outlays like print, events or signage. This provides a useful framework for planning SEO spend for businesses.
Say a company has $500,000 in revenue and designates 6% for marketing, you have $30,000 in all. Put 70% of that to digital and the small business is looking at an online marketing budget of $21,000, $1,750 a month.
By way of a simple framework:
- A stable business with a returning clientele: 5-7% of revenue.
- One that is growing in a competitive space: 8-12%.
- A new concern after quick lead generation and awareness: 10-15% if the cash flow allows.
- For the digital part, 50-80% of the total is typical given how your customers buy.
These are not hard and fast statistics. Do the sums properly: 10% of $200,000 is $20,000 but on $1 million it is $100,000. The reality is quite different despite the same percentage.
Separate Fixed And Variable Costs
On the fixed side you have retainers, analytics, software and hosting. Variable would be any paid social or Google Ads, freelance content and the like.
Make sure there is cash in hand for the leaner months. All too often an SME will put money into a launch and then be unable to field enquiries or put fuel to their campaigns. Let the marketing have room to breathe and see a customer through the whole journey.
Match Spend To Business Goals
Let your goals be the arbiter of the budget, not a salesperson with grandiose claims. One firm wants brand recognition, another wants qualified leads by the week; they are not the same.
Put pen to paper for a primary goal in the coming quarter and do not have too many supporting ones. When it is all urgent you cannot measure anything and the budget goes off into the bush.
Choose The Right Growth Stage
Before ratcheting up the paid media a new business would be wise to sort out its website, local SEO and positioning. An older business with good conversion rates may be better served by a push on paid search or email.
Here are some cases in point:
| Business Goal | Priority Activity | Useful Measures |
|---|---|---|
| Build local awareness | Local SEO, social media and content | Enquiries, branded searches, reach |
| Generate leads | Paid and organic search, landing pages, CRO | Cost per lead, qualified leads |
| Increase online sales | Remarketing, product pages, Google Ads | ROI, average order value |
| Improve repeat purchases | Customer service, loyalty content, email | Unsubscribe rate, lifetime value |
For a reference on the basics of managing a small business, the Australian Government’s guidance is worth a look.
Allocate Budget By Channel
You will not find a magic formula for every SME in Australia. The way a software consultancy in Brisbane or a plumber in Newcastle does things is not the same as a Bondi skincare clinic when it comes to how their customers make a purchase.
Treat channel percentages as a test. At the end of the quarter look at the results and put your money where it is delivering profit instead of vanity.
A Practical Channel Mix
Take a $21,000 annual digital budget and an example of how one might put the money to work is below:
| Channel | Example Share | Annual Amount | Rationale |
|---|---|---|---|
| SEO and content marketing | 30% | $6,300 | To engender trust and meet search demand on an ongoing basis |
| Paid search | 25% | $5,250 | Get in front of those with the intent to buy now |
| Social media | 15% | $3,150 | For retargeting, engagement and awareness |
| 10% | $2,100 | Retain and convert your current customers and prospects | |
| Website / conversion work | 15% | $3,150 | Less friction, better enquiry or sales figures |
| Testing and analytics | 5% | $1,050 | Put new opportunities to the test and monitor them |
One should not expect returns to be equal across the board. With SEO it can be months before there is any momentum; Google Ads will get you clicks in a hurry but are costly in some competitive spaces. And while the distribution costs of email are minimal, it is no good without a database and copy that recipients will want to read.
Conversion Path Protection
There is no point in paying for traffic and having it go to a website that is old, slow or hard to make sense of; as bad as paying for a taxi and telling the driver to put you down two streets short.
Media spend should not be ramped up until landing pages have been put to the test. They need to be mobile friendly, make contact a simple matter and leave no doubt as to the offer or what comes next. In many cases you will get more out of optimising the conversion rate than another advertising round.
An Apples and Oranges Comparison of SEO, Paid and Social
To compare the three by way of clicks alone is like assessing a ute on its paint job. They do different things in the funnel so look at the quality of the customer, the cost and timing of it all, and the level of intent.
The Role of Each
SEO is generally an investment for the long haul. It brings in people in search of answers and products yet is subject to authority, content and technical health as well as the competition. When you put together an SEO plan for a business, factor in the research, the technical side and measurement, not just the cost of articles.
With paid search you are putting offers before an active searcher. Google Ads suit high-intent queries and the like but if your targeting or landing pages are substandard the budget will be gone in no time.
Social media is for creating demand and brand awareness. A post is not going to prompt a purchase from everyone, so in addition to direct sales consider repeat visits, enquiries and assisted conversions when evaluating social activity.
Customer Economics
Divide the total spent on a channel by the new customers it has brought in to arrive at the acquisition cost. Twenty new customers for $2,000 means a $100 cost. Put that against the lifetime value and gross profit of the customer. At $800 in gross profit over time it is fine, for a one-off $90 sale with little margin it is not.
Attribution is an imperfect science. A person may call after reading a review and seeing an ad and then searching for you. So use a combination of signals such as tracked enquiries, sales records and analytics, and talk to your customers.
Spend Improvement and ROI
For an SME the ROI of digital marketing only becomes relevant when tied to commercial results. Revenue and qualified leads are more to the point than website traffic.
Configure Google Analytics to record events pertinent to the business, be it a quote form, a brochure download or a phone click. There is no need to track fifty different things because the software permits it.
A Quarterly Look at the Budget
This cycle allows you to see patterns emerge and not let anything underperform for twelve months on end. Go through each channel and measure the spend, the goal, the conversion rate and the cost of acquiring a customer.
- Make sure the tracking is in order before judging performance.
- Compare current results with useful previous or seasonal periods.
- If a campaign is spending to no effect, put a stop to it.
- Put a bit more behind the ones that give you repeatable, profitable numbers.
- Have an allowance set aside for testing out new audiences or pages.
And do not forget Australian seasonality. A quiet month is not necessarily a sign of a bad channel. Retail will be busy at Christmas, tourism is dictated by school holidays and the weather, and professional services can be slow in January. Trades will have their weather-related ups and downs.
Steer Clear of Budget Errors
You will find most put too much stock in the percentage. The system is what counts. A smaller budget with proper tracking and follow-up will beat a larger one run on guesswork any day.
A mistake one sees all too often is to put money on every platform in sight. It is a sure way to have each channel left wanting for funds and attention. Better to make your mark where your customers are already to be found and from there make the case for more.
This budget checklist is a useful guide:
- Set a marketing goal for the quarter, and one only.
- Work out the budget on the basis of what your revenue and cash flow will allow.
- Put fixed costs and variable campaign spend in separate categories.
- Put aside some for testing, analytics and website upkeep.
- Where you can, put a finger on leads and see them through to sale.
- Put the customer acquisition cost up against lifetime value.
- Make it a quarterly habit to note any changes to the budget and how the channels have fared.
And do not make the error of equating cheap with cost-effective. There is not much media expense in organic social content but it is time consuming. An SEO outlay might seem like a lot next to an ad yet it puts traffic in front of you for years. Look at the commercial return for the effort put in.
Common Budget Questions
In putting together their digital marketing budgets Australian SMEs tend to ask these questions. The answers here are a practical way to start; in the end the allocation will be dictated by the sales cycle, margins and how the customer behaves.
How Much Is A Small Business To Spend?
Five to 12 per cent of annual revenue is where many an SME will put its total marketing, with 50-80 per cent of that going to the digital side. A business making its launch will require more than one running on referrals. Let gross profit and cash flow be your guide.
What Of Each Channel?
One could put 30 per cent into SEO and content, 25 into paid search, 15 for social media, 10 for email, 15 on conversion work and the website, and 5 for analytics and testing. Consider them working percentages rather than some rule of the industry.
Is There Any Point In Digital Marketing?
There is if the business is able to act on and identify profitable customers. But when the website is hard to navigate or the offer is not well defined and enquiries go unheeded, it has limited utility. No amount of digital marketing is going to put a hat on and fix a broken sales process.
Google Ads Or SEO For An SME?
For quick demand go with Google Ads, for something more lasting with SEO. Most SMEs have both, the former for short term data and leads, the latter as an asset for acquisition over time. Margins, expertise, competition and urgency will tell you which is best.
On Measuring ROI
You need to account for everything from the spend and conversions to qualified leads, sales and gross profit. Have a look at what the channels are doing in relation to customer lifetime value, and supplement your sales records and feedback with Google Analytics. If you cannot attribute with certainty, so be it, do not put forward figures as if they were surgical.
Account For Your Marketing Dollars
The sort of budget an Australian SME should have is in keeping with its goals and the economics of its customers. Pick a percentage and stick with it, be selective with your channels, safeguard the website and do a review come the end of the quarter.
Do not be in a hurry to change course every two weeks; let the patterns show themselves. Scarlett Fairchild would say it plainly: keep the numbers to profit, measure what the customer does and put your money where he is paying attention.