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Digital Marketing - Study Notes:

Budget constraints

Clearly, whenever you’re building a marketing plan, there are going to be budget constraints.

Research

Now if you’re going to run an effective marketing plan, you’ve got to be able to understand your customers, you’ve got to be able to understand your market, you’ve got to be able to understand their needs, and there’s a significant amount of budget money and time that is spent in order to do that.

Resource

We talked about people and the importance of people, resource is always a constraint factor within any organization. It’s always a high cost factor within any organization, and having the right amount of resource to be able to deliver what you want is always going to be a constraint from a budgetary point of view.

Reach

One of the key activities of marketing is reaching messages out to the target customer in order to try to influence them. And the level of reach that you can achieve is always going to again be constrained by the amount of budget that you have to spend.

And this is before we even talk about effectiveness. As Lord Leverhulme, the founder of Unilever, famously said, “I know that half of my advertising budget is wasted, I just don’t know which half.”

So clearly there’s a recognition at the same time as marketing is facing budgetary constraints, there’s also recognition that not all of the money that’s being spent is being spent efficiently. So this balance of the budget constraint itself, and the amount of money you can spend and the effectiveness that you’re achieving for spending it, is a really critical thing for all marketers to try to focus on to become more effective.

Knowing how much to spend

There’s a number of reasons why it’s really important to understand how much it is that you’ve actually got to spend before you go into the development of a marketing plan and a marketing budget.

  • Enables more accurate planning: Clearly, if you’re not clear on how much you’ve got to spend, you can end up developing plans which are un-executable, you can end up spending an awful lot of time developing plans which are not able to be delivered.
  • Creates a realistic understanding: You know what’s achievable through the whole organization. So if you’re able to spend a certain amount of budget, you’re likely to achieve a certain level of results. You’re not going to achieve over that result. Many marketing organizations, and I’ve worked in many of them, can often be tasked with achieving really, really high goals for the organization. And it’s really important that the goals are aligned with the budgetary expectations of the organization. Otherwise, you can end up continually under-performing; you can end up with goals that are unrealistic that your budget simply isn’t allowing you to achieve.
  • Allows for a more efficient allocation of the budget: There are certain activities within any marketing plan that will require certain levels of base spend to be effective in the first place. So just because if you have a budget of $20 million, for example, and you might spend 10% on 10 different things, it doesn’t mean that if your marketing budget was $1 million, you’d still spend 10% on those same 10 things. Because some of those 10 things simply won’t give you any meaningful result for such a small amount of money invested. So if you know what your total budget is, you can know how to allocate it in the most efficient way on activities that are going to give you a return.
  • Gives an understanding of ROI: If you have a clear idea of how much you’re spending, you also have a clear idea of what level of return you need to achieve in order to pay back that spending, which can also be a useful sense check for something that is not realistic and achievable. Again, if you’re going to spend $50 or $100 dollars on something, what kind of return are you realistically going to be able to expect?
  • Enables you to project an ideal budget: This helps you to justify extra spend. Because you’ve been able to work out the efficiency, the ROI, the efficient allocation of the budget, you can also, in that delightful situation that some marketers find themselves in, be able to recommend a higher budget if the company comes back and says: “Well, if you would spend more money, how much more would you spend and where would you want to spend it?” And your understanding of your budget enables you to project how much more you might want to spend to make justifications of the return that you’ll get for that spend if you go beyond it.

Maximize the ROI

It’s also important to identify methods to maximize the ROI. And this is really about continual monitoring and continual adjustment. Again, marketers today are working in a much more fast-moving environment than they were even 5, 10, 15 years ago.

How can you do this?

  • Monitor and adjust the spending and to ensure that a campaign is being effective.
  • Monitor what competitors are doing
  • Listen to customer feedback.

Not everything you do is going to work, and in a digital environment, you’re going to find out relatively quickly what’s working and what’s not working. So your ability to adjust and adapt – pull spending away from certain areas, increase spending in other areas – is probably one of the most important things to do in order to maximize ROI.

In the pre-digital age, you could set your marketing plan and you could basically go away and come back six months later and see what results had been achieved. Now, you really can’t do that. You need to be monitoring it on a daily, sometimes even hourly basis, in order to see what metrics are coming back, how you need to adapt, how you need to adjust to get the most out of it.

Measuring the ROI

You can you maximize that return on investment?

Determine benchmark

So determining benchmark data before the campaign starts is really important. What are you expecting to get? What have you got in the past? What have other people delivered in the past? What do you think? What does success look like before you actually start the campaign? So you actually have something to compare your results to. If your number of acquisitions has gone up by 5% as a result of running a campaign, is that a good number? Do you know if that’s a good number? Is it a good number compared with history? These are the kind of questions that senior management are going to want to ask and the questions that you need to have thought about in terms of your success rates before you get started.

Measure reach and impact

How many people are you actually reaching and what kind of impact are you having on those people with the marketing activities that you’re implementing? Who are you reaching?

Analyze audience composition

So what is that audience composition and what is that size? If you’re reaching a very large number of people but they’re not people who are in your target, that’s going to affect your conversion rate, that’s going to affect the number of people who are going to come into your business.

Identify the traffic sources

So where is the traffic coming from? Are there really critical referring sites? Are people coming to you through natural search? Are they coming to you through referral sites? Are they coming to you through blogs? Are they coming to you through social media? Really important, because that shows you which channels you want to be continuing to invest in or increasing your investment in or pulling your investment away from, in order to try and ensure that you’re bringing the right kind of consumers to your site.

Calculate the conversion rate

So what proportion of people are you reaching, what proportion of people are coming to your site or your portal, what proportion of people are ultimately buying something from you? What level of conversion rate are you delivering? Is that differing by channel? Are you getting more through social? Are you getting more through research? Because that will help you understand not only the overall ROI that you’re achieving, but where is that ROI being most effective. And as we were saying before, you can then adjust much more effectively in order to ensure you’re getting the most out of your budget.

Advertising and HR costs

As we talk about advertising and human resource costs, there are kind of four main areas that many of you will be familiar with.

Advertising costs

  • Media spend: Obviously, media spend is a very big one. The money that you’re spending with the different media outlets in order to put your message out in order to reach out to your target consumers.
  • Digital content spend: Clearly in the digital age though, digital content spend has become much greater. Again, time was 20 years ago, you would make a television ad, you would make a radio ad, that would be your production cost and you’re done. In digital, you’re spending far more money, you’re spending far more time developing content, relevant content, engaging content, content that changes, that may be updated on a very regular basis. And so a significantly greater amount of money is now going into the production of digital content. And that’s something you have to factor into the plan.
  • Systems: Clearly, you’ve got to have systems that support that. So not just your overall IT infrastructure systems, but are there systems that you need to utilize in order to reach out and deliver, for example, automated email programs, in order to deliver social media programs? So that kind of system spend is an important component.
  • People: Are those people, people within your organization? Are they people who are agencies? What resource are you going to need to be able to deliver your marketing plan?

Human Resource costs

  • Social media updates: You want to be delivering these on a regular basis, so there’s going to be time spent, there’s going to be people time spent in order to be able to continue to develop those social media updates.
  • Keyword research: Keywords continually change over time as one does search engine optimization; trying to ensure you got the right keywords, trying to ensure that your bidding on the right keywords with AdWords, for example; doing that research, understanding what those best options are, is an important part of the human cost of time.
  • Management and iteration: There’s overall management and iteration time, so review meetings, preparation meetings, ensuring that the overall plan is working correctly, or takes up time of the team,
  • Analysis: You can’t get anywhere if you haven’t analyzed the results of what’s being delivered and been able to do that in a way which is meaningful enough to be able to make decisions. So don’t underestimate the human resource costs that sit along what many people consider to be the more traditional advertising costs.

Human resource activities

Let's examine the criteria which can affect the spend in terms of human resources activities.

  • Time frame for completion of the work: How long is it actually going to take? How much? How many people? How much people’s time is going to be absorbed by doing something?
  • Level of expertise: How specialist are they? Do they have all the requisite knowledge in order to be able to deliver against those requirements?
  • Level of experience: This is an important component because that will limit rework; that will make people be able to work more quickly, rather than more slowly, and with more autonomy.
  • Capacity of team: What’s the capacity of the current team? What are the number of priorities that the team actually have to work on and how much time can actually spend on any given individual activity, for example?
  • Volume of work: What’s the expected volume of work:
  • Complexity of work: What the complexity of that work?

One of the biggest challenges that people tend to face is that they become overambitious in the development of multi-stranded marketing campaigns with many, many different activities rapidly updating social media and email, and they simply haven’t got either the level of resources or the level of expertise to be able to deliver it. So what tends to happen is either it’s simply not delivered or it’s delivered with poor quality. And you’re far better off sizing your plan and sizing your activities according to the level of resources that you have, or alternatively make a recommendation for more resources if that’s what you need to be able to deliver the desired activity and marketing plan. But the relationship between those two things is really important not to forget.

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John Garnett

John Garnett is Managing Director at Bee Dance Consulting. He specializes in advising and helping businesses with strategy, marketing, and innovation challenges.

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    ABOUT THIS DIGITAL MARKETING MODULE

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    This module dives deep into budgeting and resourcing digital campaigns to set them up for success. It begins by focusing on how to plan a digital marketing budget including the key budgetary factors to consider during planning. It covers how to maximize ROI for a given budget and best practices for recruiting and retaining key digital talent. It also covers topics on setting a budget, addressing campaign objectives and KPIs, timeframes, forecasting, organizational structure and systems, and supporting processes and software. Applying a budget is also covered, including specific topics on traditional media budgets, optimizing digital media budgets, digital media pricing, channel integration and attribution, and budgeting for creative.