Defining a marketing budget can feel like a daunting task, especially when the goal is to achieve a specific return on investment (ROI).

However, by breaking down the process into manageable steps, business owners and senior leaders can develop a clear strategy to allocate their marketing resources effectively.

This blog outlines five simple steps to help you determine the right marketing investment to achieve your desired ROI. This can be applied to all areas of digital marketing, however in this example, we’re using PPC (social, search, or display advertising) in order to simplify the process. We’ll walk through each step with a practical example, making it easy to follow and implement.

Step 1: Determine the Objective and Ideal Outcome

The first step in defining your marketing investment is to establish clear objectives. What do you want to achieve, and what does success look like for your business?

Most businesses want to generate more sales as their primary objective, so grab a pen and pad and write down how many sales you’d realistically like to generate in a month.

Example:
Let’s say you run a Housing Development company, and your goal is to generate 10 sales per month. This is your ideal outcome — 10 successful transactions that directly result from your marketing efforts.

Having a specific target, like the number of sales, allows you to reverse-engineer your marketing strategy to ensure that every pound spent is contributing towards that goal.

It’s crucial to be precise with your objectives, as vague goals lead to ambiguous marketing strategies that are hard to measure and optimise.

Step 2: Understand Your Current Sales Conversion Rate

This step is crucial in order to accurately predict the success of your campaigns and avoid creating a bottleneck for your sales team. Once you have a clear objective, the next step is to understand your current sales conversion rate. This rate tells you how effective your sales process is at converting leads into actual customers.

To calculate your conversion rate, divide the number of sales by the number of leads you’ve received, then multiply by 100 to get a percentage.

Example:
For our Housing Development company, let’s assume that out of every 100 leads generated, 10 turn into sales. This gives you a sales conversion rate of 10%.

Knowing this number is critical because it directly impacts how many leads you’ll need to achieve your sales goal. With a 10% conversion rate, if your goal is 10 sales per month, you’ll need to generate 100 leads. Understanding this relationship between leads and sales allows you to set realistic expectations for your marketing efforts and investment.

Step 3: Use Your Sales Conversion Rate to Determine the Number of Leads Needed

Now that you know your sales conversion rate, you can determine the number of leads required to hit your desired sales target. Thankfully, more simple maths: just divide your target number of sales by your conversion rate (we’re marketers after all, not mathematicians).

Example:
Continuing with the Housing Development company scenario, you’ve established that you want to generate 10 sales per month, and your sales conversion rate is 10%. To find out how many leads you need, you would calculate:

Number of Leads Required = Desired Sales divided by Conversion Rate

This means we need to generate 100 leads in order to achieve 10 sales in a month.

Understanding the number of leads you need is essential for planning your marketing strategy and budget. It provides a clear target for your lead generation efforts.

Step 4: Analyse Your Current Click-to-Lead Conversion Rate

After determining how many leads you need, the next step is to look at your click-to-lead conversion rate. This metric tells you how many website visitors (or clicks) turn into leads. Knowing this helps you understand how much traffic you need to drive to your site to generate the required number of leads.

Example:
Let’s say your Housing Development company has a click-to-lead conversion rate of 1.5%. This means that out of every 200 clicks on your ads, 3 visitors become leads. To calculate how many clicks you need to generate 100 leads, you would use the following formula:

Number of Clicks Required = Number of Leads Required divided by Click-to-Lead Conversion Rate

In this case, you need to generate 6,667 clicks to produce 100 leads, which will then result in 10 sales.

Step 5: Estimate Your Cost Per Click (CPC)

The final step is to estimate your cost per click (CPC), which will help you determine the overall budget needed for your PPC marketing campaign. Please note, CPC varies widely depending on factors like your industry, ad quality, competition, and target audience. There are various tools you can use to estimate cost-per-click, but to save time, I’ve provided a handy list below for the UK market averages across the most common sectors we’ve worked with:

Search Network (Average Cost Per Click):

• Automotive: £2.46
• B2B: £3.33
• Consumer Services: £6.40
• E-Commerce: £1.16
• Education: £2.40
• Employment Services: £2.04
• Finance & Insurance: £3.44
• Health & Medical: £2.62
• Home Goods: £2.94
• Industrial Services: £2.56
• Legal: £6.75
• Real Estate/Property: £2.37
• Technology: £3.80
• Travel & Hospitality: £1.53

Example:
For our Housing Development company, let’s assume the average CPC is £1.91. Using the number of clicks required from Step 4, you can estimate the total cost needed:

Total Cost = Number of Clicks Required×CPC

This means you would need to invest approximately £12,735 per month in your marketing campaign to generate 10 sales, assuming all other factors remain constant. Not bad for a property developer!

Example Calculation: Putting It All Together

Now that we’ve walked through each step, let’s combine everything to see how it all works in practice.

Example Recap:

• Objective: 10 sales per month
• Sales Conversion Rate: 10%
• Click-to-Lead Conversion Rate: 1.5%
• Average CPC: £1.91

Step-by-Step Calculation:

1. Determine the Number of Leads Needed:
   • With a 10% sales conversion rate, you need 100 leads to achieve 10 sales.
2. Determine the Number of Clicks Needed:
   • With a 1.5% click-to-lead conversion rate, you need 6,667 clicks to generate 100 leads.
3. Estimate the Total Marketing Cost:
   • With an average CPC of £1.91, the total cost for generating 6,667 clicks would be:

6,667 × £1.91 = £12,734.97 

This example shows how breaking down your marketing investment into clear steps can give you a realistic budget tailored to your specific ROI goals.

By knowing your sales and click-to-lead conversion rates, you can make informed decisions that align with your business objectives.

Defining your marketing investment for a specific return doesn’t have to be complicated. By following these five steps you can create a targeted budget that drives results. Remember, the key to success is not just setting a budget but continuously monitoring and adjusting your strategy based on performance. This proactive approach ensures that your marketing spend delivers the ROI your business needs.

FAQs

1. What if my industry’s CPC is higher than average?
   • If your industry’s CPC is higher, you may need to either increase your budget or improve your conversion rates to achieve the same ROI. Consider optimising your ad campaigns, improving your landing pages, or focusing on lower-cost channels.
2. How often should I revisit my marketing budget?
   • It’s a good practice to revisit your marketing budget quarterly or whenever there’s a significant change in your business goals, market conditions, or performance metrics.
3. Can I use this approach for other marketing channels?
   • Yes, this approach can be adapted for other channels like social media, email marketing, or even offline campaigns. The key is to understand the conversion rates specific to each channel.
4. What tools can help me track my conversion rates?
   • Tools like Google Analytics, HubSpot, and CRM systems can help you track your sales and click-to-lead conversion rates. These tools provide valuable insights that can inform your budget decisions.
5. How do I improve my click-to-lead conversion rate?
   • To improve your click-to-lead conversion rate, focus on optimising your landing pages, improving your ad targeting, and ensuring that your calls-to-action are clear and compelling.
6. How do I avoid a sales bottleneck when launching my campaign?
   • To avoid a bottleneck, ensure that your sales team is prepared to handle an influx of leads. This may involve streamlining your lead nurturing process, automating responses, and providing adequate training to your sales team to close deals effectively.
7. How do I improve my lead-to-sale conversion rate?
   • Improving your lead-to-sale conversion rate can be achieved by refining your sales process, offering personalised follow-ups, providing relevant content at each stage of the buyer’s journey, and addressing potential objections early.
8. What is a Google Ads Partner agency, and should I use them?
   • A Google Ads Partner agency is certified by Google for its expertise in managing Google Ads campaigns. Working with a Google Ads Partner, like Tomango, can be beneficial if you’re looking to maximise your ad performance, as these agencies have access to advanced tools and insights directly from Google.

Need help developing a digital marketing campaign that delivers results? Contact us at Tomango, a certified Google Ads Partner agency, for expert assistance in defining your marketing investment and achieving your desired ROI. Our team is here to help you navigate the complexities of digital marketing and ensure your budget works effectively for your business.