Going Digital has never been so easy for SMEs than now. Cost of internet in India is the cheapest in the
world and by 2022, India will have around 829 million smartphone internet users according to CISCO.
This will account for 60% of Indian population.
Up until recently, SMEs relied heavily on local media ads like (Radio/TV), banners, newspaper inserts,
trade fairs and local conferences. While, you can never underestimate the impact of a direct one-to-one
with potential customer, in the real world, you cannot meet 1000 customers in a day, every day. But
technology today has made it possible to reach over thousands of potential customers through the
internet. Every day.
Facebook recently stated that India has over 6 million SMBs present on Facebook and over 80% of them have seen an increase in business after FB ads.
While venturing into digital marketing doesn’t cost as much, it is important to at least have a basic plan
before plunging into it.
How to plan your Digital marketing spend?
Like any other marketing plan, it is important to start off by identifying a few elements
- Who are your target customers?
- Which platforms are they using?
- What is your lifetime value of a customer?
- What is the conversion funnel like?
- How to spread your budget across various platforms?
Let us look at each of them.
Who are your target customers?
If you have been in your business for some time, you would already know who your customers are. Still it helps to do this exercise again. You need to specify:
- Age group
- Gender
- Life stage
- Income band
- Their key activities
- Where they live
If there are multiple possibilities, try to categorize them in buckets. And it helps to give names and personalities to each of them.
For example, if your business is a café you can define your customers as:
Customer example 1: Sunita
Sunita is a 30 years old housewife with a nuclear family including a husband & 2 kids. Late mornings are
the time she goes out shopping. She will come to the café around 12:30 pm looking for a quick bite in
between her shopping so that she finish off quickly and return home on time.
Customer example 2: Anil
Anil is a 25 yrs old bachelor, new to the city, living in shared accommodation who works as a sales
representative. His job requires him to cover shops across 3 different parts of the city. He will come to
the café around 4:00 pm to make up for a missed lunch or get a quick bite around 6:00 pm.
Giving your target customer an identity helps you understand their social behavior and internet usage pattern. This will help you answer the next question we face.
Which platforms are they using?
For the above restaurant example, you can easily figure that Sunita will search on Google for “cafes near me” and head to the one that promises to give her decent food, in a hygienic comfortable setting without wasting much of her time. She may also be using Facebook later in her free time, so it helps for
your business to be visible there as well.
But on the other hand, if you are a lifestyle apparel chain targeting the teens, you definitely need to be on Instagram, Facebook, Youtube & Pinterest.
Getting the platforms right is important to ensure that you are present where your customers are.
That is the whole point of digital marketing, unlike TV spots which are just broadcast to each and every viewer. There are multiple online researches available around this.
What is your lifetime value of a customer?
This is where you need to do some real brain picking. Every business at the end of the day is based on revenues. Knowing how much you earn from a customer helps you decide how much you are ready to spend for getting one.
Let’s continue with our café example.
Assuming, average bill per customer per visit = Rs. 300
And a customer will visit the café at least 10 times in a year.
Suppose your target is to add at least 50 new customers a month. Then with one month of advertising you will gain revenues of Rs. 300 X 10 X 50 = Rs. 1,50,000 over a year.
For this, even if we are conservative and ready to spend only 10% of your revenues on gaining these customers, your monthly digital marketing spend is Rs. 15,000.
While 10% is an average, some product categories like clothing, or jewellery may need 15-20% allocation.
In this way, the total lifetime value of a customer, helps you calculate the amount you can spend on gaining that customer.
What is the conversion funnel like?
A conversion funnel helps you understand your conversion rates. In simple ecommerce terms,
You need to experiment initially and analyze your visits and sales data to understand what the funnel numbers are for you. For example a B2B vendor may advertise to get more leads. In this case the data points you need to capture are:
- Number of visits to your sites / number of clicks redirecting to your site per month
- Number of leads generated per month / number of enquiries
- Number of leads actually converting to opportunities
- Number of opportunities that convert to closed sale
- Finally, average value of each sale
You can get these data points from the insights page on your platform combined with your own sales data.
Chart out the conversion funnel for each digital platform. Buying more views on a platform may be easier, but more views may not necessarily convert to leads, whereas on another platform cost per view may be expensive, but it may specifically target relevant potential customers, thus giving you better view to lead conversion.
How to spread your budget across various activities?
Typically any company spends 15-20% of its revenues on marketing. Out of this, increasingly digital marketing is taking a good chunk. 35-55% of the total marketing budget is today the norm. For products
depending heavily on ecommerce or online services, this share may even go up to 90%.
Let’s not assume that your online spend is only for digital advertising costs on social media platforms. There are also other associated costs that you need to structure in your budget.
- Content creation:
- A creatively written headline or an interesting graphic is sure to get you more attention and views than a boring text.
- Video ads are increasingly become popular and some platforms like Facebook prefer them over others.
- You also need other content like regular blog posts/ articles, creatively written emailers, product descriptions, and social media posts.
- For this you can hire a dedicated creative writer or pay someone on project basis.
- Monthly subscriptions:
- Email marketing services, website hosting and premium accounts on social media platforms.
- Start with the free accounts, but eventually paid accounts help you get the most out of these platforms.
- Management:
- If you are a newbie not comfortable with doing everything on your own, hire a digital marketer or a digital marketing agency to manage all of this for you. They will charge a fixed fee for it, but it will help you get the most out of every penny spent.
Finally, you should monitor the returns and revise the mix a couple of times.
Through some initial experimentation, you can easily arrive at your own perfect recipe for digital
marketing and get the best out of it.