How to approach digital marketing budget allocation when using an agency

How to approach digital marketing budget allocation when using an agency
Nov 23

Christopher Brown

Digital Marketing Solutions

Working with an agency to augment your digital marketing capabilities tends to be a wise move, but for it to really pay off and achieve your goals, you need to be wise about budget allocation. You don’t want to miss out on opportunities to reach a bigger audience in more effective ways and achieve your marketing goals.

And when digital marketing is used effectively, it really does get results. That’s why businesses around the world continue to invest in it more heavily and why PricewaterhouseCoopers predicts that digital advertising will grow at a compound annual growth rate of 6.6% through 2026, faster than the economy as a whole.

So, here are some points to consider for maximising the potential of your relationship with a digital marketing agency through strategic budget allocation.

Be clear about your goals and objectives

It’s important to give a digital marketing agency a clear understanding of what you want to achieve. The first step is to establish clear and measurable goals. Whether it's increasing brand awareness, generating leads, boosting website traffic, or driving sales, your objectives will shape your budget allocation strategy. Different goals may require a different mix of digital marketing services, like search engine optimisation (SEO), pay-per-click advertising (PPC), social media marketing, or content marketing.

Know your audience

You know what your business is about better than anyone, and you should also know who exactly you want to reach. It’s necessary to conduct thorough market research to identify your audience's preferences, behaviours, and pain points, and you can turn to your own sales data to mine insights.

This will inform your choice of channels and tactics to reach and engage your potential customers, as well as the allocation of resources to campaigns and strategies.

Prioritise channels that offer the best ROI

Not every channel will be a good fit for your brand or product offering, and some will yield a better return than others. While you can have your agency spread your brand budget across a wide spectrum of channels, it’s best to assess the performance of each channel and allocate your budget accordingly. For instance, pay-per-click (PPC) advertising delivers better results for driving website traffic, while email marketing might be more cost-effective for customer retention.

Knowing which channels to use in what proportion is a science, and it can’t follow a one-size-fits-all approach. An experienced agency should be able to offer the guidance you need to make the most cost-effective decisions.

Invest in quality content

Content marketing is the backbone of any successful digital marketing strategy. It’s so effective that 69% of businesses were planning to increase their content marketing budgets in 2023, according to Semrush. Allocating a significant portion of your budget to create high-quality, relevant, and engaging content is essential. The likes of blog posts, videos and infographics not only attract and retain your audience but also enhance your website's SEO, which can lead to higher organic traffic and better search rankings.

Establish a transparent relationship with your agency

Effective budget allocation also depends on the quality of the partnership you establish with your digital marketing agency. By maintaining open and transparent communication with your agency, you can ensure they understand your goals and constraints. Collaborate closely and leverage their expertise to develop a budget allocation strategy that aligns with your business objectives.

Think carefully about the size of your marketing budget

Knowing how much of your revenue to allocate to your digital marketing budget can be tricky, but start by comparing your business with industry norms. Broadly speaking, businesses across most industries allocate about 5-10% of annual revenue to marketing, but there are a great many factors to consider, such as your competitor landscape, the size of your business and its growth stage. Newly established businesses need to allocate more – typically 15-20% of annual revenue – to start building a client base and gaining a reputation.

If you're considering outsourcing your marketing needs to a digital marketing agency, be sure to account for both agency fees and media spend in your budget (and be sure to get a clear understanding of these costs upfront). But it’s worth getting the right expertise to guide you towards success as it’ll ensure you can maximise the return on your media spend.

At League Digital, we offer bespoke digital marketing solutions that make effective use of a marketing budget to deliver great results. Learn more about our digital marketing capabilities.

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