How Much Should You Spend on Digital Marketing in 2023?
As the new year unfolds, it’s important for your business to have a clear understanding of how much you will need to invest in your digital marketing — in order to achieve your revenue goals.
Having a solid budget will not only give clear direction on what kind of marketing initiatives your business can undertake, but also how much you can spend on advertising, and what kind of results you can expect to see.
Step 1:
Review your revenue and customer goals for 2023
The first step is to set clear goals for revenue growth and new customer acquisition.
Without these goals in place, it is difficult to determine how much money should be allocated towards your digital marketing efforts. For example, if the goal is to acquire 120 new clients in 2023, the question then becomes “What is the cost of acquiring 120 new clients?”.
The more ambitious your goals, the more budget you’ll need.
Step 2:
Determine your Cost Per Lead (CPL)
CPL is how much you’re spending to generate each new lead.
It’s calculated by dividing your total marketing spend by the number of leads generated. For example, if you spent Ksh 1,000,000 on marketing and generated 1,000 leads, your cost per lead would be Ksh 1000.
Once you know the CPL for each marketing channel, you can then decide on how to allocate your marketing budget across channels.
Step 3:
Calculate your Conversion Rate
Conversion rate is the percentage of leads that are successfully converted into customers.
To calculate your conversion rate, you need to know the number of leads you generated and the number of customers you converted. For example, if you generated 100 leads and converted 20 of them into customers, your conversion rate would be 20%.
Once you’ve determined your cost per lead and the expected conversion rate, it’s now time to calculate how many leads you would need.
Step 4:
Determine how many leads you'll need
If your target for this year is 120 new clients, how many leads will you need to get there?
This can be best determined by dividing your new customer target with your average conversion rate. For instance, if your average conversion rate is 20%, you will need at least 600 leads to hit your target of 120 new clients.
That is, 120 ÷ 0.2.
Step 5:
Finalize your budget
Having known the number of leads you need, the next step would be to finalize your budget.
Simply multiply the number of leads required by your average cost per lead (CPL). So, if you need 600 new leads and your average CPL is Ksh 1000, then your final marketing budget will be Ksh 600,000.
Please note that your final marketing budget depends on the CPL of the specific marketing channels and strategies you choose to invest in. For example, Google Ads may be more expensive but also have a higher conversion rate, while others may be more cost-effective but have a lower conversion rate.
It’s also important to keep in mind that this budget should cover other marketing costs too — such as working with Higanijulu, or any other agency, if applicable.
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Higanijulu helps business owners and entrepreneurs leverage their online presence to attract the right prospects, and convert them into loyal customers.
