A common rule of thumb for a business is that 10% of last year’s total revenue should be allocated for digital marketing in the current year. The problem is this method limits the business’s growth potential. An exact formula is that your digital marketing budget should equal customer acquisition costs times the number of customers you want. A few questions need to be asked. Can you hire an experienced employee, or should you hire a marketing agency of freelancer? What is your Customer Life Time Value? This multiplies Average Order Value by purchase frequency and gross profit margin. The type of product or service you sell will determine how often customers buy from you. Note that it is easier to encourage existing customers to make repeated purchases than it is to acquire new customers.
Key Takeaways:
- Your digital marketing budget should equal customer acquisition cost times the number of customers you want.
- Determine whether you can afford to hire an employee for digital marketing or need to use an agency or a freelancer.
- It’s also important to forecast your average order value and use that to calculate CLV (customer lifetime value).
“But the drawback of using the 10% method is that it limits the growth potential of your business.”
Read more: https://magnesmarketing.com/invest-in-digital-marketing/
