Have you ever tried to solve a Rubik’s cube? Even without a blindfold, it can be a hassle. Marketing can be that way too. Especially when you’re a new or small business trying to decide on your paid media budget.
You know you need to invest in online advertising to reach your audience, but how much is enough? How much is TOO much? And where do you even begin? Many business owners struggle with these questions.
Luckily, since our team has worked with many such businesses and business owners, we have the answers you need.
Why Your Paid Media Budget Matters
Your paid media budget should not be an arbitrary number you decide on based on a whim. Not if you want it to be a strategic investment in your business’s growth. Instead, your paid media budget needs careful consideration and planning to ensure every naira you spend is working hard to bring you closer to your marketing goals.
Essentially it can help you
- Get the best ROI: By allocating your budget wisely, you can ensure that every naira is working hard to achieve your marketing goals. No more throwing money at ads and hoping for the best!
- Avoid overspending: If you have more money to throw around, a budget acts like a guide, keeping you from veering off course and blowing your entire marketing budget on one impulsive campaign.
- Measure your success: With a clear budget, you can track your spending and see exactly how your paid media advertising efforts contribute to your bottom line.
Factors That Should Influence Your Paid Media Budget
So what should you consider when deciding your paid media budget?
1. Your Marketing Goals and Objectives
What are you trying to achieve with your paid media campaigns? Are you aiming to make your brand the talk of the town? Generate a flood of leads? Drive hordes of visitors to your website? Or maybe boost sales of a specific product?
Different goals require different approaches and, you guessed it, different budgets. For example, if you’re launching a new product and want to make a big splash, you might need a larger budget to reach a wider audience. But if you’re focused on generating leads for your consulting business, you might be able to achieve your goals with a smaller, more targeted budget.
2. Your Target Audience
Who are you trying to reach with your paid media efforts? The characteristics of your target audience will influence your budget. Think of the total size of the audience you want to reach. Is it a specific niche audience? Say busy moms in Lagos for a home-lesson brand? You might not need a massive budget to reach them, but you’ll need to be strategic about where you place your ads.
Another consideration would be the location. Targeting New York City, for example, is likely to cost more than choosing smaller towns. Why? Because the cost of living (and advertising) is higher in big cities. It’s like renting a billboard in Lekki versus one in Agbado – you’ll pay a premium for that prime real estate.
3. The Paid Media Channels You Choose
Different paid media channels appeal to different audiences and have different perks. They also have different costs. For example, advertising on Google Ads may be cheaper than a simple Instagram boost.
So, when deciding your budget, consider the cost-per-click (CPC) or cost-per-thousand-impressions (CPM) for each channel. Some channels might be more expensive, but they might also deliver a higher return on investment (ROI).
4. Your Industry and Competition
The competitiveness of your industry can also impact your budget decisions. If you’re in a crowded market, you might need to invest more to stand out.
Take a look at what your competitors are doing. Are they investing heavily in paid media? What channels are they using? This can give you a sense of industry benchmarks and help you determine how much you need to spend to stay competitive.
5. Your Historical Data and Past Performance
If you’ve run paid media campaigns in the past, don’t let that valuable data go to waste! Analyze your historical data to see what worked well and what didn’t. This can help you make smarter decisions about your future paid media budget allocation.
6. Your Overall Marketing Budget
Your paid media budget shouldn’t exist in a vacuum. It needs to be part of a larger marketing strategy and aligned with your overall marketing budget.
What are you doing for content marketing? How much are your other lead generation efforts costing you? How about socials? Put all these together and you’ll have a better idea of what to allocate to paid media.
7. Your Available Resources
Do you have the in-house expertise to manage your paid media campaigns, or will you need to outsource some or all of the work? Factor in the cost of tools, software, and agency fees when determining your budget. Outsourcing can save you time and hassle, but it may also mean you need a higher budget
8. Your Timeline and Campaign Duration
How long do you plan to run your paid media campaigns? Are you looking for a quick burst of activity or are you in it for the long haul?
The duration of your campaigns will definitely impact your paid media budget. Longer campaigns generally require a larger budget, as you’ll need to sustain your efforts over a longer period.
9. Your Risk Tolerance
How much risk are you comfortable taking with your paid media budget? Are you willing to experiment with new channels and strategies, or do you prefer a more cautious and calculated approach?
Your risk tolerance will influence how you allocate your budget. If you’re feeling adventurous, you might allocate a portion of your budget to testing new platforms or trying out bold creative approaches. But if you prefer to play it safe, you might stick with proven strategies and channels that have delivered results in the past.
10. Your Measurement and Tracking Capabilities
Do you have the tools and systems in place to track your paid media performance and measure your ROI? Accurate measurement is crucial for making informed decisions about your budget allocation.
Without proper tracking and measurement, you won’t be able to see which campaigns are performing well and which ones need to be adjusted.
Invest in tools and resources that allow you to track your key metrics, such as Google Analytics and platform-specific analytics dashboards. This will help you understand how your campaigns are performing and make data-driven decisions about your budget allocation.
Methods for Determining Your Paid Media Budget
Now that you understand the key factors to consider, let’s explore some practical methods for actually determining your paid media budget.
1. Decide on a Percentage of Revenue
This method involves allocating a specific percentage of your revenue to your paid media budget. The percentage you choose will depend on your industry, your goals, and your overall marketing budget.
For example, if you’re a new business with limited revenue, you might allocate a smaller percentage, like 3-5%. But if you’re a more established business with a larger marketing budget, you might allocate a higher percentage, like 10% or even 20%.
2. Objective-and-Task Method
This method involves defining your marketing objectives and then determining the tasks required to achieve those objectives. You then estimate the cost of each task to arrive at your budget.
For example, if your objective is to generate 100 leads per month through LinkedIn ads, you might estimate the cost of creating ad creatives, running the ads, and managing the campaign. This will give you a good starting point for your budget.
3. Competitive Benchmarking Method
This method is particularly helpful for established businesses. It involves researching your competitors’ paid media spending and using that information to inform your budget allocation.
There are various tools and resources available that can help you estimate your competitors’ ad spending. This can give you a benchmark to compare your budget to and ensure you’re investing enough to stay competitive.
4. What Can You Afford
This method is quite straightforward and involves determining how much you can afford to spend on paid media advertising after accounting for other expenses.
This is a good starting point for businesses with limited budgets. You can start small and gradually increase your budget as you see results and gain more confidence in your paid media strategies.
Tips for Managing Your Budget
There are a few more things you need to do after settling on a budget.
- Track your spending: Keep a close eye on your ad spending to ensure you’re staying within your budget. Use budgeting tools and platform-specific dashboards to monitor your expenses.
- Optimize your campaigns: Continuously optimize your campaigns to improve your ROI. This could involve adjusting your bids, refining your targeting, or improving your ad creatives.
- Be flexible: Don’t be afraid to adjust your budget as needed based on your results. If a campaign is performing well, you might want to increase your spending. If a campaign is underperforming, you might want to decrease your spending or pause it altogether.
- Don’t be afraid to experiment: Try different approaches and see what works best for your business. A/B testing can be a valuable tool for optimizing your campaigns and maximizing your ROI.
Conclusion
It’s not about throwing money at ads and hoping for the best. It’s about being strategic, tracking your results, and making adjustments along the way.
By considering the factors we’ve discussed and using a practical method for budget allocation, you can ensure that your paid media investments are working hard to achieve your marketing goals.
Need some help handling your paid media? With years of experience handling successful campaigns for businesses, our team of marketing experts at Edens Digital are fully equipped to help you get the results you desire. Contact us today.
FAQs
1. How much should I spend on paid media?
Well, there’s no magic number, unfortunately. The ideal budget depends on various factors, such as your goals, target audience, industry, and available resources. Start by considering a percentage of your revenue (say, 5-10%) or use the objective-and-task method to estimate your costs. And remember, you can always adjust your budget as you go!
2. What’s the best way to track my paid media spending?
Keep a close eye on your ad spending using budgeting tools and platform-specific dashboards. Most paid media platforms provide detailed reports on your campaign performance and expenses. You can also use spreadsheets or accounting software to track your overall marketing budget.
3. What if my paid media campaigns aren’t performing well?
Don’t panic! Paid media is all about testing, optimizing, and refining your approach. If your campaigns aren’t delivering the results you want, analyze your data to identify areas for improvement. This could involve adjusting your bids, refining your targeting, improving your ad creatives, or optimizing your landing pages.
4. Should I hire an agency to manage my paid media campaigns?
If you don’t have the in-house expertise or resources to manage your paid media campaigns effectively, hiring an agency is a smart investment. An experienced agency can help you develop a winning strategy, create compelling campaigns, and track your results to ensure you’re getting the most out of your budget.
