How Much Should I Spend on a Digital Marketing Agency?

Digital marketing is key to success both in e-commerce and for businesses with websites (pretty much everyone at this point). Even if you offer the best products and services, it doesn’t matter if no one knows about it.

Digital marketing addresses that issue. However, a key factor with digital marketing is cost. There are many options available. That can get confusing and make it harder to know where to allocate dollars when working with a digital marketing agency.

Of course, many might question whether they need a digital marketing agency at all.

The Advantages of a Digital Marketing Agency

The need for a digital marketing agency can be summed up in one sentence: Marketing a product is a very, very different job than making a product.

Business owners are expected to have expertise in delivering a product or service. They are not expected to know the nuances of social media marketing or pay-per-click advertising. Marketing is especially complex in the digital world, where things have moved far beyond writing a great TV spot or copy for a print ad.

It involves social media, search engine optimization, content creation, pay-per-click online advertising, email, corporate branding, blogs and many other areas.

Some businesses create an in-house marketing department, but that can prove costlier than working with a digital marketing agency. It means a large commitment of time, money and staff. And even with some of the biggest companies, having an outside agency offers perspective that they may not get in-house.

Ultimately, hiring a digital marketing agency should cost a business less and allow them to focus on making a product rather than marketing it.

Given that a marketing plan must cover so many different areas, a marketing agency can take a monthly budget and use the money in the best way to possible for success in all areas. They have the expertise that specialists bring to the table.

So those are reasons why you want to hire an agency. But what about the cost?

The Cost of Digital Marketing

So, how much should a company pay for digital marketing agency services? One way to look at it is as a percentage of revenue.

About 10 percent of revenue has stood as the usual amount. However, that amount has grown in recent years as companies realize the value of digital marketing. Companies with $5 billion or more in revenue are spending about 13 percent of revenue on marketing, according to a study from Gartner Research study. Those with $250 million to $500 million in annual revenue are still around the 10 percent level.

A lot may depend on the industry, as well. Companies in the mining industry may spend as little as 2 percent on marketing, while those education and consumer services will spend 17 to 18 percent, according to a CMO study.

Geography also plays a role. Hiring an agency in San Francisco or New York City is going to cost more, typically, than hiring an agency from elsewhere.

In summation, a good rule of thumb is to dedicate about 10% of your revenue towards digital marketing and the agency that executes on it.

All the above can give you a starting point for where to begin crafting a marketing budget. For those who want expert input, it’s a good idea to hire a digital marketing agency. The cost will likely be less than doing it on your own, and the results are also very likely to be better.

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