How to Balance Your eCommerce Advertising Budget

Vince Moreau
July 23, 2022

How to Balance Your eCommerce Advertising Budget

The more you advertise your eCommerce brand, the more likely you are to increase sales because you will be reaching a larger audience. Advertising helps to familiarize and imprint your brand in people's minds.

A common question that arises is how much should you allocate towards your eCommerce advertising budget.

Spending too much money will result in a wastage of cash and spending too little will not result in anyone knowing about your brand. 

What is an eCommerce Advertising Budget?

The Statista Research Department states that between January 2019 and April 2020, a study of eCommerce websites around the world showed that 46% of eCommerce brands spent up to $1000 on advertising.

This was the most common limit for promotional activities for their brand. But another 16% of eCommerce businesses spent between $20,000 and $150,000 per month on eCommerce advertising.

Advertising costs are used solely to promote an eCommerce business. The type of eCommerce advertising and marketing you do will depend on:

  • Your industry
  • Your competition
  • The current season
  • Where you advertise
  • The different services that you make use of
  • The size of your campaigns.

How to Create a Good eCommerce Advertising Budget

Creating a budget for eCommerce advertising seems like a difficult task.

However, most experts recommend that you spend between 5% and 15% on your marketing revenue, and subsequently 10% to 50% of that should be spent on online advertising.

But, you first need to determine what is best for your own business by following the points listed below.

Business partners calculating their ecommerce advertising budget

Create a list of goals

Your advertising campaign should have two clear-cut goals. The first one is to increase sales.

Increasing sales can be achieved by:

  • Improving conversion rates
  • Increasing website traffic
  • Creating a sales funnel
  • Retargeting lost customers. 

The second one is to increase brand awareness. This can be achieved by:

  • Getting more content shares
  • Increasing your ad impressions
  • Growing social media followers
  • Engaging new customers.

Break down your tasks

Next, you need to analyze your sub-goals and find out a way to accomplish them.

For instance, if you want to increase conversion rates, you need to:

  • Design a sales funnel
  • Create landing pages
  • And revamp your website. 

On the other hand, if you want to increase social media followers, you need to:

  • Post content regularly
  • Boost your post
  • Create viral videos.

Make a note of how you will accomplish each task.

Select channels for your eCommerce advertising

If you have advertised in the past, you may be aware of which channels worked and which did not.

However, if you are just starting out, here are some ways in which you can determine your eCommerce advertising channels.

  • Find out where your customers are heading towards. Are your customers more influenced by videos or blogs? Or do you find that most customers spend time on social media?
  • Keep track of where your competitors are spending their budget. Are other companies in your industry spending on social media or are they more inclined towards putting ads on Amazon and other marketplaces?
  • Consider investing in SEO and PPC to find out which keywords are driving traffic to websites like yours. Digital marketing channels and activities include email marketing, mobile marketing, content marketing, PPC (page search), social media, and SEO (Search Engine Optimization).

Estimate the cost

Once you shortlist your marketing channels, it is important to estimate the total cost.

It is always better to have a few strong channels and advertisements rather than have a number of weak channels. For instance, one good social media ad may generate a better outcome than three flimsy blogs.

Estimate your budget using different methods based on how much you can afford to spend on e-commerce advertising. 

Also, take a look at what your competitors are investing in and keep a similar number. Or you may determine how much you need to spend by doing in-depth market research to achieve all your objectives.

Additionally, consider the percentage of sales method which is determined by what percentage of last year’s sales or next year’s projected sales you will spend on advertising. 

Don’t forget to measure your results

Depending on your outcome, you can always adjust your allocation of resources and increase or decrease your budget for different marketing channels.

Measure your results and discuss them with your team fortnightly or monthly to see if you are headed in the right direction. 

How Should You Spend Your eCommerce Advertising Budget?

Woman planning her ecommerce advertising budget

When it comes to eCommerce advertising there are various options. Listed below are the most common ones.

Social media advertising

Social media platforms include: 

  • Facebook
  • Twitter
  • LinkedIn
  • Instagram
  • Quora
  • Pinterest
  • YouTube and more. 

You can expect to spend between four $450-$6000 per month on social media advertising for professional social media strategies, technology costs, and advertising across different networks.

Pay Per Click Advertising 

PPC advertising includes using search engines like Google and Bing to create ads and run them for you. Each time someone clicks on your ad you will need to pay. 

There is also a bidding system involved which means that if you want to display your ads or your competitors, you will need to pay more for each click. 

Email marketing

Email marketing has the highest ROIs. You will need to create emails by yourself or you could use a third party to do so and this can cost anywhere between $10-$1000 each month. 

Content marketing

Using your brand's website, you can advertise for your company by creating and promoting blogs and other content.

Content marketing services include planning, strategy development, creating, distributing, and promoting content. This typically costs between $2,000 and $10,000 each month.

SEO

Search engine optimization involves improving the pages so that your website ranks higher in search engines. The more optimized your site is, the more you can attract potential customers.

You may need to hire an SEO agency or an expert and the total cost for this will range between $750 and $2000 per month.

By combining SEO and content marketing, you can create optimized blog posts to reach potential customers through organic traffic.

It's All About Balance

The best way to know how much you should spend on your eCommerce advertising budget is to create the right balance by being flexible and monitoring your marketing efforts closely. 

You should also be prepared to adjust this budget as and when your business grows.

No matter what budget you have, keep in mind your potential customers and choose the best eCommerce advertising channels. 

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