How Much Should You Spend on Digital Marketing?
How to work out a budget from your own numbers rather than from a percentage rule.
How much should I spend on digital marketing?
Work backwards from your numbers rather than applying a percentage rule. Calculate what a customer is worth, what share of that you can afford to spend acquiring one, and how many customers you need. That gives a budget grounded in your economics rather than an industry average that may not apply.
Percentage-of-revenue rules are easy to quote and rarely useful, because they ignore margin, customer lifetime and how urgently you need growth. Here is a more defensible approach.
How do I calculate an affordable acquisition cost?
Take the average value of a customer, including repeat purchases if they are reliable, and subtract your cost of delivering it. That gives contribution. What share of contribution you are willing to spend acquiring a customer — often a third to a half — sets your maximum acquisition cost.
Use conservative repeat-purchase assumptions. Budgets built on optimistic lifetime value figures run out of cash before the lifetime arrives.
What is the minimum useful budget?
Enough to generate enough conversions to make decisions — commonly at least thirty per campaign per month. Below that, results are indistinguishable from noise and you cannot tell whether anything is working.
If your affordable budget cannot reach that volume on one channel, narrow the targeting rather than spreading across channels. Fewer, better-matched clicks produce readable data sooner.
How should budget be split between channels?
Concentrate until something works, then expand. A common sequence is the highest-intent channel first — usually search for service businesses — then add channels once you know what message converts and what a customer costs.
Splitting a small budget evenly across channels is the most common budgeting mistake, because it guarantees that no channel produces enough data to learn from.
How much should go to organic versus paid?
Depends on urgency. If you need enquiries this quarter, weight towards paid. If you can invest for the following year, organic search and content cost less per enquiry over time. Most businesses run both with the balance shifting as organic matures.
A practical approach is funding organic work as a fixed monthly commitment and treating paid spend as the variable that scales with need.
When should I increase spend?
When a channel is producing customers at an acceptable acquisition cost and results have been stable over several weeks rather than one good period. Scale gradually — large jumps often disturb the performance that justified the increase.
Watch acquisition cost as you scale. It usually rises, because the cheapest audience is reached first. Know the point at which it stops being worthwhile.
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