How to Allocate a Budget for Digital Marketing in 2020


Kevin Urrutia




February 09, 2024

As I am writing this, there is nothing but the impending holidays on my mind.

All client work is shrouded by a veil of days off, holiday parties, and the rush to successfully close yet another year. It’s difficult to think about 2020 when you’re surrounded by delicious meals, Christmas carols, and holiday cheer.

However, let’s hope you come back to this article when the end-of-the-year spirit has died down a bit. When you’re ready to tackle 2020, and the major question of the hour: how should you allocate your digital marketing budget in this pivotal year?


The importance of digital marketing

Before we dive in, let’s explore why you should be investing in digital marketing in 2020 in the first place.

We focus on direct response and customer acquisition in e-commerce, lead gen, and mobile. When it comes to results and leads, we speak your language.

  •  By next year, US businesses will spend $110 billion on digital advertising – that’s more than TV and print combined.
  • Omnichannel campaigns have a 13% better engagement rate, produce 250% higher rates of purchase frequency, and their customer retention rates are 90% higher than for single-channel campaigns.

In other words: everyone else is doing it, and you don’t want to miss out. Plus, digital marketing done right has an amazing chance of returning, doubling, or tripling your investment.

As multichannel marketing becomes more and more important, knowing where to allocate your (often limited) marketing budget can admittedly be a challenge. Here’s our take on your best options.


Determine your digital marketing objectives

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The first thing you need to do before setting a budget is to define what you want to achieve with it.

And while goal setting is never really fun, and much more attention is often devoted to executing this and that strategy, the key to starting any digital marketing campaign on the right foot is the goal.

Would you like to increase your sales?

Would you like better engagement on your posts?

Are you looking to reach a new customer base?

Would you like to promote a new product or service?

And so on – whatever the goal is, make sure you are clear about it and know what it will take on the business end. Then you can explore how to align your digital efforts to achieve that same goal.


Explore what has worked in the past

Now that 2019 is over, it’s time to put it to good use.

Take a day or two and do nothing but pore over your 2019 digital marketing budget. Compare and contrast your expenses with the incomes a certain tactic has yielded.

You may have invested a lot in a channel that ended up having a comparatively low ROI, and you’ll definitely want to do things differently in the next year. You may also have an overlooked channel at your disposal that has an excellent ROI and would be worth investing in more. 

And don’t focus on ROI alone. Examine things like: 

  • the channels that have brought in all current clients
  • the top channels that have brought in the most leads (even though they may not all have converted yet) 
  • the channels you are spending a lot on, but that are not proving their worth, etc.

Look at both the big picture and explore all the finer details of what has worked in 2019. In fact, it wouldn’t hurt to go back to 2018, too. Armed with concrete data on your business and what works best, you’ll be ready to take the next step.


Prioritize based on insight

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Now that you have clear goals and you’ve also taken a look into the past, you should have a fairly good idea of what you shouldn’t be investing in. You should also be left with a list of tactics that have worked well, and which you might want to continue working on in 2020.

It’s also a good idea to research what has worked well for your competitors, and add in a new tactic or marketing channel to the mix if you think it might be worth your while. The thing is to focus on your best-performing channels, cut all the ones that are not working, and leave some room in there for a new tactic or two you have yet to test out.

The challenge here might be to find the funding you need for these new ventures – but before you can do that, you need to calculate the exact cost of each digital marketing tactic you want to employ.


Take customer acquisition costs into consideration

Customer acquisition cost, or CAC, is an incredible figure to work with.

It is the amount of money you need to acquire a new customer. For example, you may need to spend $200 to gain a new customer. If you want to bring in 10 new customers each month, that will cost you $2000.

However, knowing that is not the most amazing thing about CAC – it’s comparing the CAC of different channels.

Another example: if you run a paid ad on Facebook for $50, you may get three new customers. On the other hand, you may be investing $1000 a month on link building, but you may only acquire one new customer via this tactic.

In this case, you should clearly increase your ad spend, as opposed to building more links.

Be advised that it can be a bit tricky to identify how a customer has reached you. But you can both ask them (once you have established some sort of relationship), and implement tracking codes in your URLs that will help you track your conversions better, to name just two simple ways to circumvent this issue.

You’ll also want to examine the lifetime value of your customers to determine how many you need to bring on to stay where you are, and how many are needed for growth.


Allocate your budget and start spending

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Now that you know all of this, you can compile a prioritized list of digital marketing tactics you want to invest in and allocate a part of your total budget there.

While you will hear all sorts of percentages thrown around and the numbers vary by industry, it’s advised that you reroute between 7 and 12 percent of your total revenue to marketing.

You can, of course, do whatever feels right (and what has been proven right based on the research we have detailed above). Just remember that you need to revisit your spend each month, and figure out if your estimations are still proving true.


Final thoughts

Budgeting can be the most strenuous part of digital marketing – so we hope that the above guide will help you ease some of the stress. Take your time and use the tips above to help you focus more on the execution and less on the sleeplessness.

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