Setting the Online Marketing Budget for 2010

These considerations can help guide executives in setting the share of 2010s budget dedicated toward online marketing.

Even in this day and age, its good to have a diversified marketing approach. Traditional retail outlets and advertising techniques can still have a profitable place alongside online marketing strategies. However, given the realities of limited budgets, the challenge is getting the mix right: what portion of the of the marketing budget should go to traditional advertising and promotion, and which should be dedicated to online promotion of the e-commerce side of the business?

One difficulty in answering that question is that it is a moving target--as consumer trends develop, the mix should be steadily evolving. The key to setting next years budget, then, is to anticipate where the next year will take those trends.

The Trend Toward E-Commerce

Few people would argue that e-commerce isnt becoming a more important component of most types of business. However, it sometimes takes a while for an advertising budget to catch up with sales trends. This is especially true of businesses with long roots in traditional retail. They may still look at online marketing as an add-on, as opposed to the future center of the business.

In addition, there is sometime a disconnect between what is generating sales and where advertising is placed. This may be simple inertia, or it may be a mis-identification of the best way to drive sales. Traditional advertising can drive traffic to an e-commerce web site, but the question has to be asked: if customers prefer to do business online, wouldnt it be best to reach them there in the first place?

More and more advertisers are realizing this. According to a recent survey, 70% of U.S. marketers are shifting resources from traditional to digital media. Businesses that do not set their 2010 budgets with this in mind risk being left behind.

Online Advertising in the Marketing Budget

To find the right level for online advertising in the marketing budget, a look at the following figures might lend some perspective:

• Share of sales. What portion of revenues come from traditional sales outlets and what comes from the Web site? Where do the trend figures suggest this will be by the end of 2010?
• Profit margin. What are the margins on traditional vs. e-commerce sales, and does this suggest assigning a higher value to e-commerce sales?
• Return on investment (ROI). Which types of spending produce the best, and most concrete, ROI figures? What does this say about where additional spending could have the greatest impact?

Once a marketing executive has come to terms with the above issues, it will be easier to more appropriately assign online marketing its share of the budget.

Lessons from the Recession

The long recession was a reality check for many marketing budgets. 38% of U.S. marketers report shifting spending into lower-cost media--a measure that may have accelerated the trend into online marketing. Besides simple cost-saving measures, the recession brought a new accountability to marketing budgets. Online advertising brings the potential for more measurable results, and thus is well suited to marketing departments now charged with running a tighter ship.

In other words, there are many good reasons why the shift toward online advertising has been so powerful. Executives would do well to make sure their 2010 budgets represent an equally powerful shift.

Source

eMarketer