Are you running a small business, or you worried about your limited resources. Then it’s time to be prudent and create a frugal marketing plan.

Create a marketing plan that helps you invest your marketing budget effectively. It is indispensable to create a clear roadmap, detailing what you wish to achieve and how much budget has to be allocated in order to achieve the required traffic and conversions online.

Scheduling a budget will also help you in prioritizing your activities and focus more on channels that you believe will add value to your online strategy. As Joe Biden said,

Online_marketing_Budget

In this article, we will discuss how to calculate online marketing budget for different digital channels.

How to Calculate Online Marketing Budget for EMAIL MARKETING?

Email marketing is the best feasible solution to reach a multitude of people who have shown interest in your product of your website.

Radicati group came up with a statistics saying 196 billion emails are sent on a daily basis. Emails are one of the cheapest but effective ways of reaching your prospects/ customers.

If it’s used wisely, this platform aids in getting better conversion. Emails have to be intensely personalized and should have a curated content on the subject line so the click through rate will be high.

Campaign Monitor says that for every $1 spent email marketing will generate an ROI of $38. It is imperative to know the lifetime value of email marketing.

Every entity should ask the below question, How much should I spend and what will I get in return?

The answer to this question is to measure how much does a subscriber worth. To calculate the CLV (Customer Lifetime Value) of email subscribers you need to find out the no: of active subscribers, the average lifetime of email subscribers (average, individual data are often hard to get), and the aftermath of it on your ROI.

Note: We are only considering active customers. Inactive customers can also generate profit, but they won’t generate profit through emails.

Each customer’s contribution to ROI = Total ROI/ Average no: of active customers.

Cost Per Mile (CPM) shows how much has been spent in order to send 1000 emails. CPM rates are almost tired. A fascinating fact about CPM is that, as the no: of emails send increases the cost per email will go down.

For eg: With a CPM tired rate of $16, sending 1500 emails will cost you $0.011.

Let’s consider you are doing your email marketing on your own and you have a list of 200000 subscribers. Then the only inherent cost will be in taking an email marketing services, for eg: an email automation tool. If you go for email marketing services like MailChimp, it will cost you $475/ month.

 How to Calculate PPC Budget?

PPC is one of the effective ways to get instant traffic to your website. PPC/ Paid Advertising have become one important component that determines the success of your online marketing.

Small businesses that ignore the importance of PPC are likely to lose the big opportunity in getting higher brand visibility.

Setting an initial budget for PPC is often a daunting experience for marketers. Initially, you need to decide which keywords you want to bid (my suggestion is to create a buyer’s persona in deciding what keywords should I select).

Create a list of keywords and select the geography where you want to place your ad. Once the geography and keywords are finalized, use a keyword research tools to determine a starting budget.

If you are planning to put your paid ads on Google then make use of Google Keyword Planner. Find the option Get traffic estimates for a List of Keywords in Keyword Planner, enter/ upload the keywords in the box allowed. Based on your requirement select whether you want your ad to be displayed on both Google and Google partners.

The next page will show you a graph with the keyword, the no: of clicks, average position, various bid levels (CPC – Cost Per Click), etc. Below a table will be shown with details of the daily clicks and the average traffic the keyword has. For a monthly projection multiply the daily cost estimate with 30 (30 – no: of days in a month).

For eg: You are selling an inspirational book. The cost of one book is $40. You went to Google and bid for the keyword “Top Inspirational Book” with a CPC of $3. Based on keyword planner the average traffic per day for the keyword “Top Inspirational Book” is 100. Considering that you will get a conversion of 5%, and Click through rate is 50% on Google. (We are ignoring the concepts like identity-based pricing).

Then the total expense per day will be, 50 x 3 = $150.

With a conversion rate of 5%, the total no: of people who likely buy your book is 5.

So the revenue is 40 x 5 = $200

Then the total profit will be, 200 – 150 = $50

Per day you have to invest $150 to make a profit of $50. So your annual budget has to be $54000 to generate a profit of $18000.

How do I manage Budget for affiliate program?

Affiliate marketing often takes lesser money compared to other online marketing campaigns. Affiliate marketing works base on the performance of the affiliate.

In affiliate marketing, the revenue is shared between the online publisher and online advertiser. Let’s break down this program and see how much has to be spent on what. Considering that you are managing the affiliate program.

Select a platform where you need to run your affiliate program. You need to be cautious in selecting the platform. Find a platform in your niche and wisely invest on it. You will be charged an amount in setting up affiliate management program software, entry fees to an affiliate network, etc.

Creative inventories – As an affiliate, you need to invest in creating high-quality content in terms of images, videos, banners, etc.

Product feed – As an affiliate, you need to supply a product feed. Based on your inventory the cost varies.

The sum total of all these expenses will give you the total cost of running an affiliate program.

To Conclude

You should also keep in mind that your marketing budget has to be scalable in nature. Constantly you need to find opportunities that can be capitalized, and to capitalize those opportunities you need a reserve fund with you. While creating a budget you should also consider allocating a portion as reserve funds.