A look at how much business owners spend per industry
With digital transformations top of mind for many CEOs, and marketing executives planning for how to best allocate their budgets for next year, I think it’s important to first provide context about digital strategy in order to begin the budget discussion. The U.S. Small Business Administration recommends small businesses (those making less than $5 million a year in revenue) spend 7 to 8 percent of their gross revenue on marketing and advertising. This is assuming your net profit margin — after all expenses — is in the 10 percent to 12 percent range (Source: Jul 20, 2017). While that is the recommendation, according to a 2017 survey published by the American Marketing Association and Duke University, the actual spend in 2017 was 11.4% of budget on marketing, and only 6.9% of revenue. These figures vary significantly when you drill down the specifics by industry.
Percent of Overall Budget Spent on Digital Marketing in 2017 (by Industry):
B2B marketers and B2C marketers see themselves spending more on digital advertising than traditional advertising over the next 12 months according to a survey published in February, 2018 by the American Marketing Association and Duke University. Want 50% more sales-ready leads? At a 33% lower cost? Keep reading. Digital strategy includes not only a thorough audit of your current systems and processes, but the latest lead nurturing ideas, methods, and techniques to generate online demand in your business.
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Starting with and using a digital strategy is the foundation for growing your business with online marketing. A proper digital strategy allows business owners and managers to look at each process from the perspective of, “how can this best benefit our business.” With that said, a successful digital transformation begins with the company website…which is the cornerstone of all digital activity. There are many factors which have an impact on success with digital, but first and foremost the website must be structured in a way to accommodate the implementation of various digital strategies. There are long term plays, short term plays, organic and paid, social and email…and ultimately all the strategies complement one another to produce the best results.
It doesn’t matter if your business is e-commerce, manufacturing or in a service industry, your digital marketing strategy matters. Once the strategic process is outlined and the overall direction and business methodologies are set, it’s time to put that plan into action. An all-inclusive digital strategy goes far beyond the internal workings and business operations of your company. Remember the big picture…and that proper implementation of digital marketing and advertising will increase revenue, reduce costs and improve efficiency, giving you the distinct advantage over your competitors.
The question is no longer whether digital marketing works, but are you making digital marketing work for your business? And it’s not only true for ecommerce. 75% of people who find local, helpful information in search results are more likely to visit physical stores. According to numbers like these which are impressive but not surprising, digital marketing delivers results for every type of company including brick and mortar storefronts.
According to the American Marketing Association, CMOs say social media spending will rise by 89% by 2022. (Source: American Marketing Association). Interestingly though in terms of the above statistic, 45% of CMOs surveyed say they have been unable to show the value of social media, while 38.6% say they have a “good qualitative sense of the impact, but not a quantitative impact.” These numbers are surprising; although it’s not surprising then to learn that 49% of organizations do not have a clearly defined digital marketing strategy. Something just doesn’t make sense in light of the aforementioned statistics and the ROI we know we get from digital marketing. Maybe companies just don’t understand the importance of having a well defined digital marketing strategy. Perhaps they don’t have the right expertise on staff or don’t know how to get the proper help. Whatever the root of the problem is, results from the same February 2018 CMO Survey indicate that companies are also investing in the development of marketing knowledge. Needless to say, numbers don’t lie, and with attribution measurements directly correlated to digital campaigns, it isn’t difficult to prove what campaigns are driving the most revenue when it comes to online marketing…that is of course as long as your CMO has the skillset to properly understand and implement digital. Company’s large and small that know how to effectively implement digital are winning out against their competition, in a very big way. The laggers seem to be the ones who remain skeptical.
B-to-C (Business to Consumer) products are the clear leader in social spending, topping out at a whopping 31.9 % of a company’s marketing budget. On the other hand, the most conservative social media spenders are B-to-B brands (Business to Business), which currently spend only 6.8% of their marketing budget on social media. It isn’t enough to have a talented team of creators or to have access to people who are coding experts. Your digital efforts will require creating great interfaces, superior web design, and specialized technical expertise to make it happen. An effective marketing strategy will drive traffic, define the best mediums and social media platforms for your business, and utilize metrics to measure success.
The Bottom Line?
In order to grow and scale your business in the age of the modern buyer, I recommend allocating at least 10% of your annual revenue on digital marketing. If done properly, your digital strategy empowers campaigns that will track and report every marketing engagement and enable you to create stronger and more strategic funnels that delight customers, create evangelists, and ultimately increase revenue for your company.
Where are you on your journey toward digital transformation? Thinking about doing some Digital Marketing or starting an online business? Tweet to me if you have questions @KateMurrayVogue.