Smart Trade-Offs in Digital Budgeting

by Jonathan Marshall

Robin Niefield from ClickZ hit the nail on the head when she describes budgets in a digital world. Even if we weren’t in a recession, it’s not like businesses have unlimited budgets. And even in sectors like digital marketing (which has done considerably better than many others), marketing professionals are overcompensating and trying to figure out how to be more effective with less money. Check out this great blog by Robin below.

This represents a real challenge in a digital world of expanding opportunities and accessible, efficient testing environments. Most marketers are like kids in a candy store with the vast array of powerful digital tools available and now, unfortunately, our nickels have become pennies. Too many options, too few resources.

That is one reason why social media has expanded at this dizzying rate. Not only is it a new and important communication option, but the lack of an associated media budget line item can leave the false perception of a free or low cost option to weigh against paid media tactics.

As I, and many others, have covered in great detail, social media is a distinct and unique channel that can’t be directly compared to paid media. So how do smart trade-offs get made in digital budgets?

Let’s assume the basics are covered — you have a firm grasp of prior program performance. You understand how audience behaviors might have shifted in the past year because you have good data and you’ve been listening to your audience and engaging with them on multiple levels. You have alignment among internal stakeholders on high-level company goals and how you’re expected to contribute. You understand where vendors and partners have in the past and can in the future offer value. You have a clear understanding of revenue goals, as well as other equally important goals, such as expansion, market share, learning, and testing. And, oh yes, your site reflects this clarity of purpose with an enriched and engaging site experience catered specifically to your goals.

Not entirely true? Well, you aren’t alone, but those basics are key to a well articulated set of goals that will allow you to budget appropriately.

To start the budgeting process, focus on a couple of key factors:

Don’t Forget to Think Big Picture

Your digital efforts exist within the larger framework of other marketing efforts. All of the marketing exists within the context of the company goals. Make sure you understand and incorporate these critical inputs.

Last Year Isn’t This Year

Even if you had the same budget as last year you wouldn’t likely choose to spend it in the same manner now. Let’s hope you learned something from last year’s testing and optimization that would inform your new approach.

Not only has your organization changed, new options now are viable and you exist within an environment that has changed dramatically. Your consumers (whether B2B or B2C) have undergone tremendous transformations that should be reflected in your planning as should the changes in your industry and competitive set.

You have a new set of opportunities and challenges that need to be examined closely. Look at the competitive environment.

If your competitors have slowed or stopped advertising, should you consider a switching message to grab market share? Do you have a different set of competitors now that consumers are cutting back or trading down? Does your messaging platform need to change as consumer motivation, priorities, and thought process may have changed?

There Can Be No Sacred Cows in Budgeting

You can’t keep a program because you like the rep or it’s always been on the plan or the company CEO will see the ad on sites she surfs. You have to be smart but ruthless if you hope to arrive at the right place.

You Can’t Count on Buzz to Generate Specific Conversion Objectives

So don’t. Use buzz, viral, or social tactics more appropriately to satisfy other objectives like awareness or engagement. You can track those tactics through to sales, leads, and other conversions, but you can’t count on the extent of consumer uptake or the timing of the interest.

Across-the-Board Cuts Can Be Dangerous

What’s more, ignoring synergistic program elements is definitely dangerous. A careful balancing act takes place in a digital marketing plan to account for consumers in different digital environments, states of mind, and at all points of the research or decision process.

Typical programs are dynamic and complex, relying on some plan components to feed the success of others. Cutting X percent of each program in an attempt to even handedly reduce expenses may (almost certainly will) upset a careful balance and leave you with less successful programs overall with a potential dip of much more than X percent.

It’s Not Always About Revenue

With certain program components you have to weigh the loss of beneficial behavioral data, or the loss of an established audience awareness or engagement. While other program components may represent a competitive defensive posture that must be maintained.

San Diego digital marketing agencies deal with such a dynamic and shifting marketplace, that testing should be built into all their budgets. Therefore, think of your budget as a fluid set of temporary guideposts, not a fixed path. It shouldn’t be an annual exercise, but an ongoing optimization. You need to maintain enough flexibility to morph quickly to take advantage of new opportunities presented by optimization or testing results, technology or environmental changes, competitor shifts, or changes within the company.

But budget your own time wisely; it has value too. Though your budget should be thoughtfully constructed, you need to watch for that point of diminishing return on effort where trying to optimize budgets upfront de-motivates the kind of ongoing optimization of online budgets that is a hallmark of online effectiveness.