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How To Budget For Marketing Costs

How To Budget For Marketing Costs

Many business owners ask us for a quote to build a new site or provide some marketing services, but without a defined budget. They then shop around, looking for the best price.

This approach may appear to make sense. Unfortunately, it can be a terrible idea. Let me explain …

Price comparison works when you are comparing like for like. For example, if you are looking for a window cleaning service to clean your windows once a month, or you are buying a specific make and model of laptop.

However, digital marketing and web design are far more like buying a holiday than a window cleaning service. If I went to a travel agent and asked “how much for a holiday?”, the agent will need to know two essential pieces of information before they can give me an answer.

Firstly, what are my requirements and expectations? Secondly, what is my budget?

Every customer’s needs and budget are different. Many clients can tell us what they want (e.g. a new site or Google Ads management), and what they expect. Many though struggle to define a budget.

Most simply have not given it much thought, and are unsure what the cost should be. Others are afraid that we will take advantage of their budget, or are trying to compare quotes without influencing them.

The problem is, we have no way to design the optimal solution for them. Even if a travel agent knows where you want to go, they cannot suggest the best transport, accommodation type, possible activities etc. without knowing your budget.

For marketing and web design, it can be even harder.

Typically, a client is really looking for an end result, e.g. more sales. Unless they have a clear idea of how they will achieve this and give a precise brief, it can be impossible to provide an accurate quote. Even then, what they ask for is often not the best solution for their needs.

The next problem is, if a quote is given and exceeds their budget, they think that they can not afford the work, or they should go with a cheaper provider. This is false logic that leads to the unwanted results from false economy (discussed in another article).

Our job is to get you the results you want as best we can given the budget you have. Marketing (including web design) is one area of your business you should never try to economise. Marketing makes you sales – and, if done correctly, it is an investment that pays back many times its cost.

If a quote exceeds your available budget, then we need to work with a client to see what we can do with their available money to help grow their business to the point they can afford the site or marketing services they want.

There are endless web designers, developers and marketers out there that will under quote to get your business. They also almost always under-deliver. Hardly surprising … to do a good job takes time. (And, if they were any good they should be able to market themselves better and not be stuck trying to compete on price.)

We see our job as to identify the best possible solution for what you can afford. If you are in the luxurious position where money is no object, then great – we will tell you we can provide you with the VIP tour with change to spare. If not, we will try and help you figure the way to get the best result or return on the dollars you do have.

Take a Google Ads campaign as an example. Many companies advertise they provide unlimited keywords, reports, campaigns, copywriting etc. for a low monthly fee. And this may look attractive to the unsuspecting business owner. The problem is that to deliver this is not difficult; to deliver it well in a way that gives a good return requires much more time than their fee allows.

Many businesses will be far better off spending $1,000 or $2,000 each month in management fees than if they only spent $100 or $200. Remember, it is not how much you spend, but the return you get on what you spend. $100 spent that returns $50 is a $50 loss. $1,000 spent that returns $5,000 is a $4,000 profit.

The same is true for a website. The vast majority of web designers know little (if anything) about marketing or conversions. Creating a website is easy. Creating one that converts visitors to customers well is much, much harder. It takes time, and so costs more. But … it is a much better investment.

Now, that said, spending more is no guarantee for a better return. There is a point at which the law of diminishing returns kicks in.

Imagine a bell curve. At the start of the curve, the cheap end, you are losing money. At a certain point you break even, then you start making a better and better return the more you spend. Then it peaks. This peak is the optimal return for your investment. After this, it begins to drop, and at a certain point you start losing money again.

Most business will generally get a feeble return at best on a website costing only $1,000-$3,000. However, most would clearly be throwing money away if they spent $100,000.

Others, including one of my previous businesses, spent over $2,000,000 USD on developing an online platform – but this was money well spent as it was able to produce more in revenue than it costs to create. This is a bit of an extreme case though; partly because this site was also the product, not just a sales page or online store.

So, to return to the question of budget … there is no correct fixed amount to spend. Each business has a certain amount of available funds that it can afford to invest. A good marketing company will be able to help you identify the best way to invest that initial budget, then help you scale it. If your marketing is working, the more you spend the more you make – so why limit it?

When it comes to shopping around for a new site or marketing, being frugal will likely cost you far more in the long term. If a company gives you a straight quote without checking your budget or understanding your needs, be very careful. And, never compare costs. Compare returns.

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