It’s not surprising that many companies are confused about how to use and budget the Internet as a marketing medium. For example, in a March 2011 American Express poll, small and medium size businesses (SMBs) responded that social media was their Internet marketing tactic of choice, but many think search engine marketing does a better job. The same poll reveals that 25 percent of respondents “don’t intend to implement any online marketing efforts for my business during 2011.” Since the Internet has become as ubiquitous a public medium as any has ever been (and quite likely quicker), it’s difficult to understand why one-quarter of the businesses responding to the American Express poll would allow their competitors such an advantage.
Online marketing budget allocation is a function of the size and organization of a business. In another recent survey conducted by Altimeter Group of companies with more than 1,000 employees, it was determined that the average spending on social media during 2011 will be approximately $1 million. The survey defined some of those companies as “advanced users”: formal social media programs, dedicated teams and line items in their budgets and more than two and a half years managing social media activities. These companies were expected to spend an average of $1.86 million on social media during 2011. More of those “advanced users” are B2B companies, compared to B2Cs.
How these “advanced users” plan to allocate that $1.86 million is an important lesson for many businesses trying to demystify their online marketing budgets. The three major line items for “advanced users” are internal soft costs, customer-contact programs and investment in custom technology. These companies know that the quality and effectiveness of social interaction via the Internet depends on their staff and training, which is why just less than $500,000 will be allocated for those soft costs.
These companies also plan to spend almost three times more of their online marketing budgets with boutique marketing agencies than traditional agencies. “Advanced users” are also keenly aware that their budgets can no longer be as effective as possible and deliver a maximum ROI with standard technology. That’s why they are committed to spending approximately $760,000 of that $1.86 million on customizing the social media technology they use. These include technology development, community platforms, brand-monitoring platforms, social CRM and management of social publishing.
At the level of small to medium size businesses (small being less than 100 employees, medium being less than 500), the focus of online marketing budgets is somewhat different. The same American Express poll also reveals what online marketing tactics SMBs plan to add during 2011 and why their choices are not necessarily the best. For example, the respondents to this survey rank traditional SEO fourth on the list of what they’ll add to their online marketing mix, but beyond basic SEO content to compete locally, this tactic is not as important for SMBs as it is for large companies.
They also think Internet display advertising is a good use of their budgets (ranks sixth). These same companies rank rich local listings, such as Google Places, as ninth on the list, when in reality, this is one of the important tactics for SMBs because so many local consumers search for a store, product or service via mobile devices. Many of the respondents to the American Express poll are making wiser choices when they rank “social media” and “mass email” as second and third on their lists of the tactics they will implement during 2011.
For those small and medium size businesses that operate multiple locations, especially retail, in one or more markets, there are a number of other online marketing tactics that are important budgetary items. For example, sponsored local ads will continue to fortify SMBs with well-established brands and many stores, as well as driving more traffic from free local listings. Plus, those companies selling local ads, such as Superpages, Insiderpages and CitySearch, are more likely to “discount” a significant buy.
Franchise operations often find PPC (pay-per-click) campaigns very effective as measured by cost per acquisition. Individual franchisees can implement these campaigns especially if they have marketing budgets to manage; or corporate can initiate PPC campaigns based on geographic areas which are then part of the corporate online marketing budget.
Debra Aho Williamson, eMarketer senior analyst, may have demystified the future of online marketing budgets best when she stated, “…a substantial portion of marketers’ expenses will go toward creating and maintaining a fan page, managing promotions or public relations outreach within a social network, and measuring the impact of a social network presence on brand health and sales. Paid advertising will not be the primary focus, but it will serve to drive traffic and engagement with the larger social network presence.”