How To Build Your Marketing Budget For E-commerce in 2022
Over the last two years, the world has changed drastically, including the way businesses sell today. Thanks to COVID0-19, which has set a new trend in shopping, shifting everything online because the traditional physical shopping had been unavailable due to the lockdown.
However, even after the quarantine and lockdowns ended, the digital transformation era sustained itself, generating tremendous revenue online in e-commerce.
Hence to accommodate the latter, e-commerce business owners are constantly working towards creating innovative ways to appeal to their targeted audiences and customers to buy their products and services. However, it is challenging for e-commerce marketers to attribute the ROI to the appropriate marketing campaigns. As we are halfway down in 2022, let us discuss what a marketing budget for e-commerce looks like today, the new trends, and the top marketing channels that have retained their position in the current year.
The Fundamentals OF An E-commerce Marketing Budget
The rule of thumb for most e-commerce businesses is that 8 to 10% of their entire budget should go into the marketing activity, including digital marketing strategies. However, today the e-commerce world has reached new heights in popularity and necessity. Therefore, the budget allocated towards marketing should also increase.
WebFX's 70-20-10 rule is now becoming popular, accounting for time and money spent.
Spend 70% of your budget on the present: Spending 70& of your funds on marketing strategies that work successfully. Whether digital marketing or your best-selling product, spend money on it to yield better results.
Keep 20% for the following steps: keep 20% of your marketing budget for e-commerce for strategies that you would apply to target new audiences, for promoting a newly-launched project or service.
The remaining 10% for the experiments: The remaining 10% of your marketing budget should be kept for applying new and experimental marketing strategies to sell your services or products, such as new technology or trending marketing strategies you have not experimented with yet. This would give your e-commerce business a competitive edge and help you stay ahead of your competitors.
How To Set A Marketing Budget For E-commerce Business?
Now that you are aware of the fundamentals of an e-commerce marketing budget let us discuss how to plan your budget in a few easy steps.
1- Establish a sales cycle
Establishing a sales funnel is the first step in planning a marketing budget for any business. Doing so will help you determine where exactly your money will be spent. It is simply a process your potential customers will go through to make the final purchase. Understanding your sales funnel will also help you know what digital marketing strategy you should use and how much it will cost to keep people inside the funnel, make a purchase, and not cast away from your website.
2- Be aware of your external costs
To know how much you can keep for your marketing budget, learn the cost of other external business operations. For instance, to keep a certain amount for the marketing campaign, consider your operational costs, shipping costs, employee salaries, electricity and water costs, etc. It will help you determine the services you should invest your money in and set a mark for the business revenue.
3- Understand your business goals
Every blog or article you read about the marketing budget for e-commerce will ask you to understand your business goals first. And where is the lie? To achieve something, you need to know what you want to achieve, so you can set an amount to reach the latter. For example, you can divide your business goal into getting more sales, getting more followers, subscribers, leads, etc. Knowing where you want to reach by the year-end will help you set your marketing budget accordingly.
4- Know your market
Before investing significantly in your ecommerce business's marketing activities, you need to understand your actual market. You should be aware of what your competitors are doing in order to plan the best marketing strategies to stay ahead of the competition. By running a competitor analysis, you will learn where others stand and what you need to invest in driving success for your e-commerce business.
What Are The Best Channels To Allocate Your Marketing Budget Into?
All e-commerce businesses should work towards diversifying their marketing campaign budget so that they do not only exist digitally and, of course, not on a single channel. Knowing your business nature, you should initially understand whether your marketing activity should be more traditional, such as print, radio, TV, or general PR, or you need to make your existence more towards the digital side.
Considering digital marketing, there are several channels to divide your marketing budget into. However, you must be clear and intentional about choosing the best marketing strategy to invest your money in. Digital marketing channels include:
- Direct Mail
- Email Marketing
- Affiliate Marketing
- Content Marketing
- Paid Search
- Product Listing Ads
- Social Media Marketing, etc.
According to recent stats, e-commerce businesses with a revenue of $1 million yearly tend to spend 15-25% of their marketing budget on SEO and up to 55% on PPC. Companies with more significant revenue, up to $100 million, tend to spend more than a third of their marketing budget on PPC and SEO.
What Are The Top Trending Marketing Channels This Year?
The following are the four top marketing channels that are working well this year and worthy of putting your marketing budget into.
Most e-commerce marketers find referral marketing an easy and instant way of attracting new customers. With a blend of the current innovative technology and an increase in online sales, more and more businesses tend to spend their marketing budget on the word-to-mouth approach. By building the brand's image, e-commerce businesses look forward to more and more people referring their products and services to others.
Recent analysis about the after-effects of COVID-19 revealed that various customer loyalty programs skyrocketed on different marketing channels. For this purpose, the brands started realizing the importance of the latter, which actually makes sense as 80% of the buying occurs when customers like the way they are being treated by a brand.
Hence, a customer is more likely to buy from your brand and become a retaining customer when they feel better about your business and the products you are offering. It means investing some of your marketing budgets in creating attractive loyalty programs to retain buyers would not be a bad idea.
Email marketing is one marketing method that has retained its strong position for years and is still going strong in 2022. Therefore, for an e-commerce business, this is an excellent opportunity to engage and attract more customers.
Spend your marketing budget on creating interactive emails with a mobile-friendly interface and personalized messaging to generate a better ROI.
Why Do You Need A Marketing Budget For E-commerce Business?
Here are a few reasons why a marketing budget for e-commerce is essential.
- To stay financially on-track
To develop a successful marketing strategy, you must know where you spend your money. Hence, when you set a marketing budget, it helps you to track all your expenditures, over or under-spent.
- To spend your money appropriately
If you have a marketing budget, you will know where to put your marketing funds. You would know how much to spend on each marketing strategy and determine which approach will work the best for your business's nature or if your chosen digital marketing company fits in your budget or not.
- To set your business's goals
A pre-planned marketing budget helps you set practical business goals and benchmarks to take it forward. With a planned e-commerce marketing budget, you can invest carefully in each marketing channel, understanding your revenue better.
- To help you plan for the future
A planned budget for e-commerce marketing allows you to plan appropriately for the future and prevents you from getting into arguments regarding the need for extra funding for the marketing campaign throughout the year. A long-term plan brings flexibility, which can create a more effective and consistent marketing strategy.
While we wrap this article up, it is also essential to learn that your marketing budget for e-commerce will constantly fluctuate, having its ups and downs. Whether it is because of the competition, the product's popularity, new technologies, or marketing strategies.
Therefore, if you are looking for the answer to how much you need to keep in your marketing budget, let us tell you there is no definite answer to this. However, we hope we have all the necessary information you need to know when planning your e-commerce marketing budget this year. While you spend some on the successful marketing channels, leave a few dollars for experimenting with new campaigns. No one understands your business better than you! Good luck.