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Managing your Marketing Budget

 by zack on 02 Aug 2013 |
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Whether you’re just launching your ecommerce store or you’ve been in business for a while, you still need to constantly reassess your finances and adjust your budget accordingly. More money means more budgeted capital for all, less money means a different allocation of resources. So it doesn’t matter if you’re a rank amateur or a seasoned pro, you still have to make adjustments no matter where you are in the ecommerce process. Keeping this in mind, we’ve come up with a simple and effective list of tips and tricks that anyone can use to improve their marketing budget. No matter whether it’s the first time through the sales cycle or the forty first, there’s always room for improvement.

Budget and ROI

First and foremost, it should be noted that there is no “one size fits all” when it comes to budgetary concerns. There aren’t any formulas that you can plug your numbers into and come out with the perfect individualized budget. There are simply too many variables for that to be the case. Since your revenues, products, marketing, content strategy, and overhead are all unique to your specific situation, you have to take all of these different factors into account when developing a budget.

The most important thing you want to consider when building a budget is the potential ROI. In case you didn’t know, ROI stands for Return Of Investment. This is the amount of money you get back as compared to the money you’re spending. To be more specific, if you’re spending 30% of a $10,000.00 monthly budget on an SEO campaign, yet your organic search traffic is only responsible for a small fraction of your conversion revenue, let’s say $1900.00 over that same period of one month. That’s a very low ROI and simply a bad investment. Not because SEO isn’t a good investment, but perhaps because you’re using the wrong SEO tactics.

It could be the SEO firm you’re employing, or maybe you’re using some outdated tactics, like building thousands of black hat links. Whatever the case may be, such a low ROI should inform you that the budget needs to be readjusted.

How to calculate ROI

Calculating ROI can be an extremely complicated process. As we’ve already mentioned, there are a lot of different variables to take into account. There are, however, some very, very, very simplified versions of an ROI formula that you can use to get an idea of how much an investment is paying off.

In general, ROI = [(Payback - Investment)/Investment)]*100

So let’s define our terms. Payback is defined as the money you’ve earned that can be tracked directly back to a specific investment. The investment is the amount of money you’ve spent. And the 100 is so you can express your ROI as a percentage.

So in our previous example where the investment was $3,000.00 on SEO, and the revenue generated from conversions that were directed to your site exclusively from organic search traffic was $1900.00

Let’s plug that into our formula:

ROI= [($3,000.00-$1900.00)/$3,000.00]*100
= ($1,100/$3,000)*100

You’ve made just under thirty-seven percent of your investment back this month. Time to readjust.

How not to calculate ROI

In the previous example, we talked about a monthly ROI. It should be noted that ROI needs to be calculated monthly and annually. Try not to use trial periods any shorter than a month as they can cause you to come to inaccurate conclusions.

Additionally, we isolated a single variable of your advertising budget. You want to make these calculations not just on single variables, but with your business as a whole as well. It’s good to isolate variables to decide where you can cut costs, but it’s important to take a broad view of your investment strategy as well.

One important thing to remember is that investment doesn’t necessarily include only capital. You can invest a lot of time in a marketing campaign as well, and isn’t time idiomatically congruent with money?

Calculate your ROI based not just on your monetary investments but on the investment of your overall resources.  Calculate your own hourly rate, and that of any employees working on the project, not just the direct fiscal concerns.

Where to Spend

There are a number of different areas that you can dump advertising dollars into. In general, these are the major areas of investment:

SEO- SEO is a highly touted and much targeted area of investment. The advantages of SEO are astounding, but unfortunately the field itself is constantly in flux, and as a result is very volatile. SEO strategy is based on an expert’s ability to keep up with the ever-changing algorithms and search engine updates conducted by major traffic drivers like Google, Bing, and Yahoo! It’s also a consistent cost.

Because of the ever changing nature of search engines, SEO is something that an ecommerce store has to keep paying in order to consistently rank higher in search engine results. However, the amount of traffic and concurrent conversions that can be attained by an effective SEO campaign is nothing to sneeze at. Honestly, SEO is essential for an ecommerce store, but it isn’t the end all and be all of your marketing budget.
PPC- If SEO is Yin, then PPC is Yang. Pay Per Click advertising is a sponsored link that is advertised by a search engine. You don’t have to pay for the link to be prominently placed. Instead, the costs accrue in accordance with the amount of clickthroughs that the link attracts. Hence the self-explanatory name: pay per click.

PPC is another example of a consistent cost. As long as your link is attracting those clicks, you’ll be paying for each and every one. This can get very expensive, especially if only a small amount of those clickthroughs end up in conversions. If you’re going to invest heavily in a PPC campaign you want to make sure that your landing page is on point in its Conversion Optimization, which we’ll discuss in more depth below.

Again though, despite the expense, ppc can be a very powerful form of advertising that generates tons of traffic for your site. If the ads are generating leads, it’s up to the rest of your sales funnel to convert those leads. The only problem comes in when the leads you’re attracting are low quality. That’s why you need to put a significant amount of market research into your targeting before ever investing in a PPC campaign. You don’t just want the curious to clickthrough; you want the curious and the hungry.

CSE- Product listings on Comparative Shopping Engines (CSE) are Huge. They consistently out-perform text ads and they’re worth their weight in advertising gold. Getting your products listed in the Google Shopping app, Amazon, Shopzilla, EBay, Yahoo, Bing, or any other major listing will mean a very healthy boost in your revenue. These comparison shopping engines will host your product feeds for a fee. Either a cost per click, or a cost per ad fee. It just depends on the listing.

Conversion Optimization- Conversion optimization is the process by which you shore up any holes in the latter half of your sales funnel. It means streamlining your landing page, investing in attractive copy, putting up killer images, hooking clients with free content, along with numerous other additional steps to be taken. Check out our post series on Conversion optimization beginning here.
Social Media Marketing- Social Media Marketing is one of those advertising markets that’s still in its beta testing phase. Marketers know that there is a gold mine of data for targeting potential customers on different social networks, but all the kinks for attracting traffic from the different platforms haven’t been completely worked out just yet.

Facebook is generally considered a bad investment.  Twitter can be very powerful for creating brand recognition and positive buzz, but it isn’t the highest value on creating conversions. LinkedIn is still an untapped resource to a large degree.

All of these have their pros and cons, and each could fill up eBook volumes as far as applicable strategies are concerned. Take a look at our recent posts on Twitter marketing, and keep an eye out for social media marketing trends as time goes on. While it’s still largely an unexplored field, you can bet that there are a lot of case studies being conducted at this very moment.

Content Marketing-Content Marketing is another subject this blog has covered in more depth, but the necessities of a content marketing campaign are as follows: offer free useful information, become a trusted source of data within your niche, capitalize on your reader/viewer’s trust in your brand with special offers to your followers. There’s a lot more to it than that, but you can check out the different posts for that information.

After examining each marketing avenue, you’d be smart to decide where you should spend your advertising dollars. This is another complex and difficult problem. One which we’ll have to discuss in enough depth and word count in our next post on the ins and outs of managing a marketing budget. While you’re anxiously awaiting the next installment in this post series, take a look at your marketing metrics to discover where your biggest advertising challenges lay. Are you suffering from low traffic, low quality leads, internet obscurity? Try to isolate the problem and look at which agent of advertisement would best address the problem. 


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