Even though it is seen to be a prominent pain point among some of the most experienced content marketers and brand custodians, creating budgets for content marketing is not a topic often discussed. What is it about this topic that continues to challenge us? In this blog, we decode the key challenges content marketers face while creating a sustainable marketing budget and explore approaches to overcome them.
Is there a way to create sustainable budgets for content marketing?
The short answer is, yes.
Let us break down the challenge further.
- How do you identify a rational number that works well for your business?
- What are the various content assets that you should allocate resources to?
- What percentage of your budget should be allocated to content distribution?
- How do you measure the impact and leverage it for your business’s long term gain?
Question 1: How much should I budget for content?
Marketing budgets are a factor of a business’s key goals, the stage the business is in and the industry it is operating within. Marketing spending usually ranges between 5%-12% of gross or projected revenues, sometimes rising to as high as 20%.
Smaller businesses spend a bigger piece of the revenue as compared to larger businesses, and B2C businesses are seen to spend more than B2B businesses.
The US's Small Business Association sets a general rule of thumb - businesses with annual revenues less than USD 5 Million and a profit margin of at least 10% should set aside 7-8% of gross revenues for their marketing.
Content marketing, an exercise that is seen to generate 3x more leads than outbound marketing and cost as much as 62% less, should see an allocation of about 20-30% of the total marketing budget.
So, if the revenue of a running business (start-ups require more marketing budget allocation) is 10,000,000 USD, your marketing spend should be about 1,500,000 USD (an average of 15%), and the budget for content marketing should be about 375,000 USD.
These allocations should take care of content strategy, research, creation, design, distribution and testing, which can help you understand and plan for your next business milestone.
Global spends on content marketing are on the rise as a result of the COVID-19 pandemic, a trend that might continue or even grow in the years to come. As a result, content has found accelerated success, especially within medium- and large-sized B2B organisations. According to a survey by the CMI and MarketingProfs, 28% of medium and large company marketers who were surveyed individually said that they had shifted paid advertising dollars to content marketing over the past year.
While these numbers indicate general trends, each business requires strategic decision making to allocate their marketing budget in a way that is best suited to achieving their own unique business objectives. Such decisions are based on the experience and acumen of marketing leaders in the company, as there could be infinite permutations and combinations of allocating this budget.
In my honest opinion, this combination of rational, ruthless number crunching and creative strategy is what makes marketing so exciting and adventurous.
Question 2: What am I budgeting for ?
Once you have earmarked a budget that you are comfortable with, it is time to allocate the spending that can help you reach your marketing goals in the most efficient way possible.
We usually start with key questions that form the basis of the allocation plan:
- What are the main marketing objectives that you would like to achieve with your content plan?
- What distribution channels are best suited to your audience?
- What are the tools you would need to invest in to execute the content plan?
- What are the key performance indicators (KPIs) that define the success of your campaigns?
The answers to the above questions will help you arrive at a strategy that optimises spends and maximises returns on investment.
Here is an example of how your content marketing budget allocations can look like:
There are hundreds of content distribution channels, and it is vital to pick a combination of ones that your audiences use. Furthermore, the combination of chosen channels determines the content formats that you invest in.
For example, social media platforms use crisper, visual formats, whereas e-books and slide shows give you a chance to talk about your subject in a comprehensive manner.
Question 3: What’s a good distribution/production ratio for content?
It is worth noting that different types of content formats have vastly different price tags. We've found that blog posts are usually one of the more mindfully priced options — you can choose to pay per word or per article — so the degree of monetary control is high. Case studies, infographics and videos,on the other hand, require much more work to create. A cinema-quality video can cost upward of several thousand dollars because of the spectrum of options available.
Selecting the right content format is only half of the battle. The content you have so painstakingly produced also needs to reach your target audiences.
Traditional wisdom followed the 80/20 ratio as the gold standard (wherein 20% budget was allocated to the cost of production and 80% to the distribution). The onset of social media platforms changed not only how we consumed content but also how much and what. It has significantly accelerated the way content is distributed and amplified.
In recent years, I am noticing pioneering marketers step away from the golden ratio and focus on the quality of content created. They use the quality and relevance of their content to hook audiences and nurture loyal customers, leveraging organic ways of distributing their content. I recommend testing your budget allocations to find what is best suited for your business. You may find that a 60/40 or even a 50/50 split works well for you.
An excellent way to approach this persistent A/B testing ideology is to closely monitor your current distribution strategy and analyse the data on a granular level. Then, identify pieces that are getting the most traction - this will help you understand what content resonates with your audience and allow you to allocate marketing dollars where they matter most.
Question 4: When do content marketing efforts demonstrate returns?
This is, by far, the most crucial question content marketers have faced. The fundamental truth is that investing in content marketing does not produce immediate results. Instead, it is a long term activity that could take 6-8 months (or more, depending upon the volume and frequency of the content published) to show any results. Rand Fishkin, CEO & Co-Founder of SEOmoz, defines this as the Gap of Disappointment.
But all is not bleak. In its 2015 benchmark report, HubSpot found that companies who had successfully published 400+ relevant blog posts get 2x the amount of traffic as those with less than 400.
By generating higher volumes of content, your business should rank for more long-tail keywords. Long-tail keywords are long, specific queries on search engines that describe what the user is looking for in greater detail. They contribute to quality organic traffic, and more often than not, a higher quality of leads as well. Consider the following searches:
“MBA programme in London for new undergraduates ”
While the first option is a highly competitive keyword, the second option indicates a buyer with a specific, time-sensitive need and is closer to buying into an MBA programme. Publishing a lot of quality content containing keywords relevant to your target audiences should generate high-quality leads, thereby increasing the returns on investment.
To summarise, in order to measure any investment, have a long term focus. Short, tactical campaigns can ensure immediate spikes, but investing in consistent, great quality content is like participating in a decathlon. As Fishkin rightly explained, any traffic, leads and revenues attributed to content marketing tend to demonstrate an exponential curve of growth instead of a linear one.
Here are some helpful inputs that will help you formulate a clear and sustainable budget for your content marketing:
1. Put the dollar on meaningful metrics.
A significant 87% of marketing teams define brand awareness as their priority and focus on the numbers their content can reach. In our experience, successful content managers take a step back and look at the whole marketing funnel - scrutinising the cost implications at each stage as the prospect trickles down the funnel. Then, they assign costs to each outcome to derive a sharper impact for their business.
A. What is the total number of hours it takes per month to create a blog?
Let’s assume it’s three posts per week at an average of four hours per post, so that would be 48 hours.
B. How much do those hours cost the company?
Hypothetically, this is your team’s compensation. We have divided each member’s salary by 2,000 (hours worked per year based on a 40-hour work week with two weeks off) to get an average hourly fee.
C. How much do the overheads and benefits add up to?
A baseline that companies attribute to this is 40-50% of monthly salary. Overheads and benefits include employee benefits, administrative costs, office rent per person, etc. We’ll use a mean of 45% for our calculations, so the overheads and benefits add up to $511 ($1,135 * 45%). The total labour cost for your blog each month is $1,646 ($1,135 + $511).
The aforementioned calculations are for businesses that have in-house content teams. For those who work with content marketing agencies as well, simply obtain the annual cost of your blogging retainer/project and divide it by 12.
Let us now look at the revenue this blogging exercise can generate for a business.
Assume that our blogging efforts convert 15 clients over a year. On average, say each client spends $2,500 per month with our business. That is $90,000 per year in revenue. However, our cost for producing the blog posts would be $26,100 per year.
Dividend = (Returns - Investment)/Investment)*100
This blogging exercise just delivered a dividend of 245%!
2. Constantly reassess strategy and be agile.
The theory is that the consumption of content is constantly evolving and that marketers must keep up. Content managers on top of their game know their audience behaviours, platform algorithms, high and low-performing content and keyword rankings like the back of their hand. They focus on observing gaps in their strategy.
Monitoring audience behaviours can enable your team to spot trends quickly and modify your strategy to align with your marketing objectives. However, a quick word of caution - while monitoring data is vital, content moves in smaller troughs and peaks - so, do allow your campaign enough breathing space to accommodate the daily ebb and flow and focus on spotting overarching trends instead.
3. Vanity metrics versus Action metrics
Web traffic, engagements, likes, clicks are simply pit-stops in your journey and not destinations. Equating everything to revenue from day one may leave you crestfallen. Talented marketers understand the difference between a vanity metric and an action metric. Vanity metrics are usually overly simplistic, skip context, and most importantly, do not help improve your business in any meaningful way. A few examples of vanity metrics would be:
- Raw page views (they can be engineered!)
- Running total of customers
- Running total of purchases
- Social media followers
Action metrics, on the other hand, help you make beneficial business decisions and can be reproduced wilfully. By shifting perspective and delving a little deeper, you will be able to create meaningful insights from your data. Let’s look at some action metrics for the above vanity metrics:
- Unique views/bounce rates/time spent on each page/cost per lead vs marketing qualified lead vs sales qualified lead.
- Unique customers/return customers/average spend size by each customer.
- YoY or MoM increase in purchases.
- Click through rates/active engagements/share of voice as compared to competitors.
Often, marketers stick to a safe route and map their content budget closer to the industry norm/competition. However, what might appear safe may also be restrictive. Look at the content distribution landscape as a whole and map it to the channels of consumption most used by your target audiences. You will more often than not find a golden gap of opportunity - driving higher impact for lesser spends.
This said, creating a budget can be described best as a scientific art form. There are rules that guide results, but there are enough examples of solid intuition and execution changing the playing field for everyone. Each business has unique needs and constraints, and hence, a content budget for each business is different. A successful content marketer knows there is no fixed formula - it is vital to understand and decode the environment, keep taking calculated risks and move fast.