How to Budget Online Versus Offline

When I teach seminars or speak at conferences, the single most commonly asked question remains, “How much should we be spending online?” And, usually, I give pretty lame answers. I seem to remember answering a lot of “It depends,” as we infrequently have enough time to give sufficiently complex answers to be accurate. But we certainly do here, so let’s flesh out this question.

Online Versus Offline

Right off, we need to address the gross proportions: How much of an online budget is appropriate relative to the total marketing spending on a brand? Of course, this depends on several things like the product category, target audience, etc., but, even more so, it depends on the political culture of your client.

At most clients (and in most agencies) people’s jobs become very media-specific. Somewhere, deep in the bowels of your client’s organization, there is a group of people who are very, very concerned with print (or TV, or outdoor, or… you get the picture). And they see your commandeering of media dollars as a direct attack on their worth as humans.

The sad truth is that most budgets are divided across media not so much by the rational needs of companies and products, but by the seniority and authority of the people in charge of the various media. This makes the agency’s job a bit complex in attempting to separate out a decent chunk of the marketing spend for interactive work.

Step one is to determine who the real decision makers are. Step two is to make sure they understand that it would be rather embarrassing to make irrational decisions regarding media spending. I used to have a budgeting presentation I’d roll around to various client-management types to make sure they understood the rationale behind their marketing managers’ budget decisions. This worked surprisingly well at some large clients, like Microsoft.

The Product Category

So what is the right percentage? The type of product will determine this in good part. Here are some factors that would tend to increase the percentage we should be spending online:

  • The percentage of sales or fulfillments that occur online

  • The degree to which the product’s purchasers can be found online
  • The importance to the product category of purchaser online research and evaluation
  • Audience expectations that the product should be seen online

Likewise, several factors might move dollars over to the traditional media side:

  • Product categories may imply certain audiences that are difficult to target online, or otherwise easier to reach traditionally

  • The company’s CEO may want to make a big traditional media splash to promote an IPO or the stock price. (Just so everyone’s on the same page, this happens to be illegal.)

The Metric Value

Some companies are able to take the data gleaned from online work or traditional direct mail work, for that matter and use this learning for future marketing, product development, or other reasons.

To the degree that a client has the infrastructure to take advantage of this data, it makes more sense to spend media where this effluent of data will be harvested.

Compensation

Finally (and, of course, cynically), you don’t want your client to be spending many online dollars with you if he or she isn’t willing to pay the premiums necessary to properly do this work.

Online media is more expensive when it comes to agency resources, production, tracking, and analysis. Many times I’ve suggested to clients not to spend online if they weren’t prepared to do it correctly.

To pay for all of this management overhead, it makes sense to spend online only if the campaigns involve more than $50,000. Otherwise, the percentage eaten up by the management gets a bit oppressive.

The Percentages

So, factoring in all of these influences, I find that between 20 and 60 percent of a marketing budget’s dollars are spent online. Retailers and soap companies might see a good proportion much lower than this, and software companies might see it a bit higher.

However, if you are selling something online, or are looking for a target audience known to be reachable online, and you are spending an arbitrary number like 10 percent online, you might be moved to re-examine the motives behind that budget allocation.

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