The size of your eCommerce marketing budget is a decisive factor in what your business will achieve over a set period. This amount is of course not the only factor in success; there are many other decisions to make about how you plan to spend that budget: Which platforms will you use? How big must your return on investment be if you are to achieve your company’s targets?
Some businesses use simple formulas such as spending 10% of a previous year’s profit on marketing. For a new business, this might be as high as 15%. Of this, a large proportion may be spent on eCommerce, depending on how integral online sales are to a company. The chances are that if a company has eCommerce at all, it will be very important.
Most companies prefer to go into great detail how eCommerce budgets are spent. After all, there are so many ways it can be invested.
Your target ROI
Your business may well have a target ROI. As such, you need to keep a very close watch on how your ROI is changing. This can be tricky if you have multiple eCommerce marketing platforms – for example, PPC, SEO, affiliate marketing, social media marketing or product feed marketing. You should look at how much each of these costs in order to get a sale, and how big the average sale within each platform is. These figures are not always easy to arrive at, but even a ‘ballpark’ figure is better than nothing. For those with a cast-iron target ROI, it is perhaps advisable to invest most of your budget into proven techniques, and a smaller amount into untried areas. An 80/20 split is common.
Tracking these figures is also no easy task, but as you focus on your ROI, you should look for ways to improve it – and equally, improve the reporting processes that enable you to track it. Your Internet marketing partner, if you have one, will be able to handle many of these processes for you.
Average order values
Consider how many sales you want from the eCommerce marketing budget based on the average order value. This can be a good way to arrive at a target ROI.
Comparing budgets with competitors
Is your eCommerce spend sufficient to compete with key rivals? Such figures may not easily be arrived at, but if a company has 10 times the revenue of your own, they may have a similarly sizeable marketing budget. With this in mind, it is important to set realistic targets as regards what you can achieve with your fund.
Investing in new marketing approaches
Many companies discover a marketing method that brings in sales and then stick with it. While this is of course prudent, it is advisable to invest some money into new areas of marketing, in case the most relied-upon method fails. For example, if a company made 85% of its sales through SEO traffic, but then found itself penalised by Google’s Panda update for having thin content, it may lose a huge amount of revenue and have no back-up marketing approach. It is important to always be looking for the next marketing technique.
As you can see, setting an eCommerce budget is a complex but very important part of running a successful online outlet. With enough time and dedication, and input from your Internet marketing firm, you will certainly learn to manage yours effectively, and achieve your ROI target