How to calculate cost per acquisition

How To Develop A Digital Marketing Budget

Sometimes it can feel as though you’re throwing darts blindfolded in order to develop a digital marketing budget. Should we spend more? What is our cost threshold? Or maybe you’re just throwing money at a tactic and hoping for the best. Fear not marketer as your friends from Bluefin Strategy are here to help guide you to something a little better than a dartboard.

Develop A Spend Threshold

You sell widgets for $100. Should you spend $100 on your marketing efforts? OK, that was an easy one (hopefully you answered no). Should you spend $75? $25? There is no right answer per se, although ‘typically’ a marketing budget allocation of about 25% is standard. However you shouldn’t just go for standard. First you need to understand how much it costs to create that $100 widget. Keep in mind all resource, sales, and operations costs. What is left over can be sheer profit or allocated to marketing. This allocation is whatever you feel most comfortable with and, as mentioned before, there is no real hard and fast rule to stick to. Just don’t spend more than you take in of course.

Estimate Your Percentages

Now it is time to dig into your web analytics a bit. Do you have a historical Conversion Rate or Click Through Rate? These will vary wildly based on your business model, but here are some averages we have seen:

Conversion Rates

  • Lead Generation~2.5%
  • Ecommerce ~4%
  • Free Signups ~20%
  • Webinar Registration ~30%

Click Through Rates

  • Display Ads ~0.35%
  • Social Media ~0.90%
  • Paid Search ~2%
  • Email ~5%

Sample Digital Marketing Budget

Now it’s time to put all of that together. Enter the numbers you developed above into our handy Digital Marketing Budget Calculator to get your estimated Cost Per Click and Cost Per Impression Thresholds. Once you have those you can do keyword research to see if the CPC’s align with your thresholds or see if your display ad provider falls under your maximum CPM.