A Digital Marketing Budget Breakdown
Every company operates with a marketing budget in mind, but as a CMO or Director of Marketing, how do you know you’re getting everything you need out of your budget?
When we realized that many businesses aren’t sure how to calculate their current marketing budget, or aren’t calculating it accurately, we set out to break down digital marketing budgets to show what you would get in-house vs. what you’d get with an agency.
The first step to strategically spending your marketing budget is to identify how much you’re currently spending on marketing. While this should be easy, there are a few reasons this gets complicated.
Marketing is Often Both Fundamental & Secondary
One of the main reasons a marketing budget is hard to calculate is that not all marketing is the same. Certain elements of marketing are essential to a new business.
These are elements like the company name or product name, the logo, and the company color palette. These fundamental marketing elements are often sectioned off into brand or branding. Consider the brand and branding a subset of a company’s overall marketing.
We make the distinction because often branding is crucial to founders, owners, and executives of businesses, while ongoing or day-to-day marketing plans are often of secondary importance. This is a large factor in what makes the marketing budget a gray area.
How to Calculate Your Digital Marketing Budget From Employee Salary
Many small companies do not accurately calculate their marketing budget because the budget is tied to an employee’s overall salary and responsibilities. You need to consider the actual time spent on marketing activities, employee benefits, and software required to do the job.
Time spent on marketing activities
If this describes your current business status, you can calculate your marketing budget by determining what percentage of the employee’s time goes to marketing efforts. Whether it’s 4 hours a week, 10 hours a week, or it varies, determine an average number of hours per week.
For example, if digital marketing activities take up 20 hours of a salaried 40-hour work week, that’s 50% of the employee’s time. If their annual salary is $60,000 total that means that the company’s marketing budget is currently $30,000 a year.
Full-time employee benefits
It’s important to note – this doesn’t include the cost to supply full-time employee benefits like PTO, paid holidays, sick days, and health insurance.
If we consider 2 weeks of PTO, 5 paid holidays, 3 sick days, and health benefits at an additional $10,000 cost per year, the marketing budget is now $40,000.
Software and technology
It also does not consider providing this employee with the necessary equipment like a computer, office space or home office stipend, or any software programs the business may need to subscribe to in order for the employee to do their job.
Here’s just an example of technology your in-house marketer may need access to
- Computer: $1,000
- Adobe Photoshop Business Account: $35.99/month – $432/year
- SEMRush: $119.95/month – $1,439.40/year
- MailChimp: $11/month – $132/year
- Sprout Social: $89/month – $1,068/year
With the plans listed above, you’d be spending over $4,000 per year simply to provide that employee with the marketing tools they need to function in a jack-of-all-trades digital marketing role.
For full transparency, please note that none of the prices listed above represent the premium tier. All are either the most economical option or the most appropriate middle-tier of the software service.
The fact is if you only have one employee putting 20 hours a week in, there’s no need for the premium tier of any of these services. The employee won’t have the time to need that sort of depth of access or service.
Overall, your digital marketing budget breakdown for the year comes to approximately: $45,000.
The One-Person Marketing Team Unicorn
Before we continue with the marketing budget breakdown, there’s a topical myth that needs to be addressed.
It’s popular on LinkedIn, Indeed, and other recruiting websites: the marketing unicorn.
The marketing unicorn refers to the employee that’s simultaneously an SEO, PPC, Social Media, and Graphic Design Expert that can swiftly analyze these channels, create creative assets, and then coordinate them across 5-7 different marketing channels.
The reality is this person does not exist in the modern age of digital marketing. It was a phenomenon of the early 2000s when companies had just their website, email newsletter, and maybe a Facebook account.
But now, with most companies opting to have multiple active social media accounts, wanting a variety of visual assets from lifestyle images to videos, and needing content specific for each platform’s audience, the need for a digital marketing team has greatly accelerated.
Comparing $45,000 spent on in-house vs. agency marketing only illustrates the effectiveness gap further.
In-House vs. Agency Marketing Budget Breakdown Comparison
Given the scenario above, your company is spending $45,000 on the part-time marketing efforts of one person. Compared to what you’d receive with an agency for the same amount, it’s quickly evident which is an effective use of your budget.
In-House Digital Marketing Budget Breakdown Overview: $45,000
- One Employee with at most two specializations
- The budget spend goes entirely to Employee Salary, Benefits, and Required Software.
- Anything your employee can’t do will require a web developer or outside contractor that the company will have to take time to scout and hire.
- Any additional marketing efforts added (e.g., a new social media platform gains popularity) are going to take time away from established efforts.
- The company will perpetually struggle to accurately calculate the yearly marketing budget spend is, or the annual return on investment.
Agency Digital Marketing Budget Breakdown Overview: $45,000
- Selection of service teams for different channels like SEO, PPC, Social, or Web Development
- Multiple professionals in each discipline work for your company each month.
- Access to technology and data that the Agency uses on your behalf
- Detailed monthly reporting on the effectiveness of your marketing channels, including the return on investment for your marketing efforts
- Transparency with budget spend, including management fees and media budget
- A network of professionals for you to draw from for any work that’s outside of your agency’s scope or ability
Marketing Budget Breakdowns Favor Agencies Over In-House
If you’re a business owner struggling to understand how much you’re spending on digital marketing we’d love to get in touch.
In our experience, it’s likely that you’re spending more than you think, and putting more effort in for a smaller return than you would be if you were partnered with a full-service digital marketing agency.