How to Set a Realistic Budget for Digital Advertising

One thing we're often asked is how much money should I allocate for Facebook ads? Clients have heard that digital advertising and social media marketing can generate significant results, but when they boost posts for $30 at a time, just aren't seeing the return. So today, we're joined by Katija from Misfit Digital, Deane & Co's partner for all things digital advertising to find out how to set a realistic budget for your digital marketing! Take it away, Katija...

I speak to a lot of different people, with a lot of different online businesses. The one thing most of them have in common is that they’re wanting to generate growth and get new customers.  Digital advertising is an exceptional way to do this.  

As a digital advertising specialist, it’s my job to make sure that a.) we reach new audiences and bring them through to the site and b.) that we can get them to come back to the site to purchase/or become a lead.   

It’s also my job to help clients set realistic expectations around growth and also how to make sure that they’re applying the right budget to reach these goals. If you’re in this position now, here are some of the actions to take to make sure you set the right budget.

Do your research FIRST.  

I can’t stress how important this is to do. Have a look at your website conversion rates, where your traffic is coming from, who is buying from you, keywords that are driving people to the site, etc. and start to make a consumer profile.  

Use Data to Inform your Audience Targeting

When it comes to planning your advertising, the biggest mistake people make is ASSUMING they know their audience. Let your numbers do the thinking to start. If you see that 90% of your traffic that are CONVERTING are female and living in Sydney - this is a really good place to start your targeting. Then you can go into Facebook ads manager and see how you can expand on this potential audience.

Know your website numbers and what traffic you need to get them to take an action.

If your conversion rate is 1% then in theory 1 out of 100 people that come to your website will purchase from you. I’m going to use an e-commerce example here. Let’s say that your average order value is $80. Currently you’re making on average of $3,000 per month.  

$3000 / $80 = 37.5

That’s roughly 37 customers each month. So let’s say you want to start making $5000 per month, that brings the total number of customers to 62. That’s 25 new customers per month. So let’s think about our conversion rate here. If only 1 in a 100 are converting, that would mean that we need to get 2500 more people to the site to reach our new revenue goal. So with digital ads, you’re wanting to get the most relevant traffic to the site at the lowest cost possible.  

The next step is to understand average cost per clicks on each channel. I need to say that it changes a lot dependant on your audience, so my advice would be to test your ads with a small budget ($50) first to try and get a baseline CPC (cost per click).  If you’re getting a CPC on Google of .50c then that means in order to get 2500 new people to the website, it’s going to cost you $1250. 

TRAFFIC NEEDED x COST PER CLICK (CPC) = SPEND 

This works out to that in order to generate an additional $2k per month revenue, it is going to cost you $1250 in ad spend. 

There are a lot of variables within e-comm that can help increase this - lower CPC (if traffic is from your target audience), increased conversion rates, and GOOD CREATIVE! You need to play around with all these variables and test different channels to find what’s best for you.  Or if you’re not sure - get the specialists to help.  

If you'd like to learn more about how digital advertising can improve your sales, Deane & Co heartily recommend Katija! Email us and we'll introduce you.

Photo by rawpixel on Unsplash

Claire Deane