Setting and allocating budget

"What does online marketing cost" cannot be answered with a single number, but it can be answered with a method. Once you know what a customer is allowed to cost, you know what you can spend — and budget becomes a choice instead of a feeling.

Start with what a customer may cost

Three numbers determine everything:

1. Average order value and how often someone returns: customer value across the whole relationship.
2. Gross margin on that value. Marketing can only be paid from margin, not from revenue.
3. Conversion rates in your funnel: visitor to enquiry, and enquiry to customer.

An example. Customer value € 6,000, gross margin 40% (= € 2,400), and you want to spend at most a third of that on acquisition: a customer may cost around € 800. If one in four enquiries becomes a customer, an enquiry may cost € 200. If 3% of visitors convert to an enquiry, a visitor may cost € 6 at most.

With those three outcomes you can judge any channel: a € 9 click price only works in this example if the conversion rate is higher than 3%.

What organisations spend in practice

Orders of magnitude we see in SME practice, as a guideline and not a norm:

Situation	Services per month	Media budget per month
Local or single niche, one channel	€ 750 – € 2,000	€ 500 – € 1,500
Multiple channels, growth target	€ 2,000 – € 5,000	€ 1,500 – € 6,000
National, competitive market	€ 5,000 – € 10,000+	€ 6,000+

More important than the amounts is the ratio: never spend so much on execution that nothing is left to be visible, and not so much on media that nobody improves the campaigns and pages.

An allocation that stays workable

An allocation that holds up in practice:

• 70% to what works. Channels and campaigns with proven cost per lead.
• 20% to scaling. Something that shows promise but is not stable yet.
• 10% to experiments. New channels, new angles, allowed to fail.

Also deliberately reserve part of it for the conversion side. A conversion rate moving from 2% to 2.5% lowers your cost per lead by 20% — usually cheaper than 20% more media budget. See conversion optimisation.

Balance between harvesting demand and creating it

Channels that harvest existing demand (paid search on buying intent, branded keywords) perform best short term, but their volume is capped by how many people already search. Channels that create demand (content, social, video) have a longer run-up but raise that ceiling.

A practical starting ratio is 60/40 towards harvesting when you need results fast, and 40/60 once your current search demand is saturated: you notice that as rising cost per lead while volume no longer grows.

How to build budget over the first three quarters

• Quarter 1: measurement in order, one channel done seriously, key landing pages rewritten. Keep budget deliberately low; here you mainly buy knowledge.
• Quarter 2: scale what is proven, add a second channel that reinforces the first.
• Quarter 3: build structural visibility (SEO, content, email) so you become less dependent on click prices.

Scale in steps of roughly 20 to 30% per month. Doubling a budget often does exactly what you do not want: the system goes looking for a broader audience, and cost per lead rises with it.

Where budget evaporates in practice

• Broad keywords without buying intent. Many clicks, few enquiries.
• Campaigns nobody dares to stop. Agree per initiative which number defines success and within which period.
• Traffic to a page that does not convince. Every channel gets more expensive when the page behind the click is off.
• Measurement that does not add up. Without reliable numbers you optimise on gut feeling. See measurement and attribution.
• Too many channels at once. Five channels on half a budget produces five times too little data to learn from.

When you should not spend more

If your cost per lead rises while volume stays flat, the market has not grown — you are buying a more expensive audience. That is the moment to invest in offer, proposition and conversion instead of media. And if your sales process is already not following up on current leads properly, extra budget mainly produces extra missed opportunities; start with follow-up and lead process.

For the channel split that fits your goals, use the marketing mix selector. The underlying choices are in strategy and channels compared.