How to determine digital advertising budgets strategically



As the pandemic continues to impact the way organizations do business, the ability for paid advertising’s messaging and visibility to easily pivot alongside the business, has made it a crucial component of any marketing mix.  Paid advertising is not only one of the quickest ways of reaching target audiences, it also gives (most of) the control to the advertiser – we choose when, where, how and what the user sees.

Organizations are already budgeting for next fiscal year and we are collaborating with our clients to determine what the “right” number is.  Determining the target ad budget is a “chicken or the egg” scenario. You can:

  1. Work backwards and create a channel visibility strategy that aligns with an established budget or
  2. Begin by identifying the channel visibility strategy that meets your organizational objectives, and then determine the budget based on that information

The first approach will limit reach and creativity; however, an experienced paid advertising manager will know how to maximize the dollars available.  If your budget has not yet been established, or if there is an opportunity to revisit it, you will want to ensure that you have considered the below before finalizing your numbers for next year.

  1. Have a Clear Objective Before Selecting ChannelsIs the objective lead generation or awareness? Should your eCommerce campaign target a specific ROI or is the focus this quarter on an overall revenue lift? It is natural to want to “stretch” your budget by wanting the investment to do it all for the brand – increase calls, increase newsletter subscriptions, increase social media followers, etc. The truth is that your investment can likely get you many, if not all, of these lifts; however, there must be a single objective for each campaign that is used as the measurement of success. Having clarity on this will lead to strategic choices in the channels and budgets selected.
  2. Understand Competitiveness and Inventory
    A paid advertising manager must understand the competitive landscape and available inventory to make strategic budget recommendations. He or she needs to understand the cost per action (i.e. cost per click, cost per thousand, etc.), for the priority keywords, placements, and channels that align with your objectives.For example, if the average cost per click for a particular priority keyword is $9, this alone will give you a sense of what your minimum starting point should be.  In this example, focusing only on Google Search, the budget will need to allow for at least:

    • Visibility for known priority keywords
    • Visibility for other keywords to test – especially crucial with accounts that have higher CPCs as this is how we identify additional keywords with less competition and therefore, a lower cost
    • Enough traffic volume during a 1 to 3-month period in order to identify trends – the lower the budget, the longer it will take to collect data
    • Expansion into Bing – for most verticals, Bing tends to be less competitive, although inventory is limited

    In addition, while we do not recommend blindly following what the competition is doing, it is helpful to understand how saturated a particular channel is so that our clients have a sense of what they are up against.

  3. Establish Offering and/or Audience Priorities
    Whether the budget is unlimited, or you are running efforts lean and mean, it is helpful to rank services and/ or product offerings by priority (when possible). Our team spends a lot of time understanding this information and the reasoning behind it.While a monthly budget may have already been established, if we know that Service Line 1 is a high priority this quarter, we will recommend and allocate additional dollars to that area if we see strong performance (or read about a shift in the competitive landscape that provides a unique opportunity).Alternatively, the information can help make tough decisions about campaigns that may need to be paused to fund others limited by budget.
  4. Test, Test, Test, but Don’t Be a Commitment Phobe 
    We are huge proponents of testing. We recommend having a “core” budget for the campaigns plus, an additional ongoing budget for testing. Testing new channels and tactics is not only a way to grow campaigns, but it can also provide a competitive advantage if you are one of the first and only to test a new tactic. It allows for visibility in areas not yet saturated by competitors which grabs the attention of your audience and can keep costs lower.On the flip side, it is important to allow enough time for the test to run. While tempting, do not pull the plug on something because it is not yielding the results you are seeking immediately. An experienced paid advertising manager can recommend a realistic duration for the rest based on variables such as audience size and budget allocated.Once you have found a winner, include that tactic into the overarching “core” budget now that it has been proven.
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