How to Create a Digital Marketing Budget: 4 Considerations

A robust digital marketing plan is pivotal to long-term business success. Yet, economic challenges—like rising inflation—have forced many organizations to reassess their marketing budgets and control marketing expenses.

A report by consulting firm Deloitte shows that nearly half of marketers cut their spending in 2023 because of inflation. As a result, it’s imperative to know how to prepare for economic challenges by budgeting strategically.

Even if you aren’t responsible for making financial decisions at your organization, understanding budget allocation can help you become a more effective digital marketer and lead more efficient marketing teams.

Here’s an overview of why a digital marketing budget is important and factors to consider when creating yours.

Why Is a Digital Marketing Budget Important?

Your digital marketing budget outlines the funds you can allocate to marketing activities. It helps you track expenses and revenue to determine strategies’ return on investment (ROI).

Since digital marketing is constantly evolving, it’s crucial to have an agile budgeting approach to deal with financial fluctuations. Despite a decline in marketing funds over the past two years, businesses expect an increase by the end of 2024 due to trends like increased digital advertising and social media use.

According to Deloitte, companies will spend 19 percent more on social media in 2024 and 24 percent more over the next five years.

Mobile spending is also projected to grow. Deloitte’s data shows that companies making 50 percent or more of their sales online spend roughly 27 percent of their marketing costs on mobile—and that number is predicted to rise to 40 percent in the next five years.

“These strategies require significant investment, and companies need to ensure that their marketing strategy has been successful for the bottom line of the business,” says Harvard Business School Professor Sunil Gupta, who teaches the online course Digital Marketing Strategy. “This requires the use of quantitative metrics as well as qualitative judgment.”

If you want to help drive your organization’s performance, here are four factors to consider when creating your digital marketing budget.

4 Factors to Consider in Your Digital Marketing Budget

1. Goals and Objectives

Your digital marketing plan’s goals and objectives are essential to your budget. They provide clear direction and ensure your organization’s marketing efforts align with its broader strategy and desired outcomes.

“Budgets are finite,” Gupta says in Digital Marketing Strategy. “Managers need to allocate their budget toward the methods best suited to their goals.”

For example, during its first few years of business, athletic wear company Gymshark aimed to build brand awareness. Yet, it didn’t have the funds to launch extensive marketing campaigns. To expand its reach and boost sales, the company partnered with fitness influencers to showcase its products in workout videos, product reviews, and lifestyle content.

“If you’re a new brand with a limited budget, you might want to share free products that would allow influencers to engage with their followers through new and exciting offerings,” Gupta says in Digital Marketing Strategy.

2. Marketing Metrics

Marketing metrics are crucial to your marketing budget.

“Measuring success and allocating a budget are two sides of the same coin,” Gupta says in Digital Marketing Strategy. “To make wise budget allocation decisions, we must understand which efforts have been successful and which haven’t.”

The best way to do this is by monitoring profit-focused key performance indicators (KPIs), such as customer acquisition cost (CAC)—the total expense incurred to acquire a new customer. This metric is critical because it helps you assess your digital marketing strategy’s cost-effectiveness.

“As more and more companies shift their marketing budgets to digital media, the cost of customer acquisition through digital channels keeps increasing,” Gupta says in the course.

Reasons for that include:

• Bidding wars: Competitive digital platform bidding for target keywords or audiences
• Personalization costs: Expensive tools and technologies needed for audience targeting
• Consumer decision-making: Ad fatigue necessitating increased content development and testing investment

CAC is just one piece of the puzzle. ROI also helps determine your marketing strategy’s financial return by providing valuable insights into lead quality and channel effectiveness.

Check out the video below to learn more about ROI, and subscribe to our YouTube channel for more explainer content!

For instance, opting for digital channels with low CACs can appear cost-effective but may attract price-sensitive customers—diminishing your ROI. Similarly, a high CAC doesn’t ensure customer engagement because investing in channels they don’t use can yield minimal returns.

Related: How to Calculate ROI to Justify a Project

3. Target Audiences

Your target audience—the consumers most likely interested in your products or services—is vital to consider when creating your budget.

“While you can try and market a product to everyone, consumers have different needs and preferences,” Gupta says in Digital Marketing Strategy. “What appeals to one group of consumers may not appeal to another group.”

For example, Digital Marketing Strategy features footwear company OOFOS, which has four main audiences:

• Workout warriors: Fitness and sports enthusiasts with active lifestyles
• Regular exercisers: People who pursue fitness activities three to five times per week
• Active occupation: Professionals who constantly work standing up, such as health care workers and teachers
• Pain sufferers: Those who suffer from constant foot and joint pain

OOFOS uses digital channels—like social media platforms—to connect with a wide audience, strategically focusing on young fitness enthusiasts without excluding older individuals who experience pain.

Related: Paid vs. Owned vs. Earned Media: What’s the Difference?

4. Attribution

Attribution—the link between your marketing efforts and the customers you acquire—can guide your budget allocation decisions.

By identifying the channels, campaigns, and actions that drive the most value, you can determine customers’ journeys through the marketing funnel across digital platforms.

The funnel’s three stages are:

• Awareness: Introducing customers to your brand or product to address a problem they have
• Consideration: Making customers aware of your brand or product while they evaluate alternatives
• Decision: Using information gathered during the previous stages to influence consumers’ purchasing decisions

When a potential customer encounters your product through a social media ad, it raises interest but rarely results in a purchase. That doesn’t mean you should shy away from spending money on the awareness stage.

“A display ad might not immediately lead to purchase and therefore have low ROI,” Gupta says in Digital Marketing Strategy. “But this ad might generate interest among potential customers who later click on a search ad to buy the product.”

This is why attribution is crucial. By considering how one channel impacts others, you can understand your strategy’s overall value.

Common approaches to accounting for attribution include:

• First interaction: Attributes 100 percent of the sale to the first ad a customer was exposed to
• Last interaction: Awards 100 percent of the credit to the last ad a customer saw or interacted with
• Linear attribution: Gives equal weights to all ads a customer is exposed to
• Time decay attribution: Gives more weight to recent ads a customer encountered
• Position-based attribution: Takes all ads into account but weighs the first and last higher

All these methods can be beneficial when creating your marketing budget—but they don’t account for real consumer behavior. If you need more information, experiments like A/B testing can help you determine the role different ads play in generating revenue.

Marketing Budget Example

Now that you understand the key factors in creating a digital marketing budget—such as goals, metrics, audience, and attribution—let’s consider what a sample budget might look like in practice.

The example below outlines how a company with an annual marketing budget of $120,000 might allocate funds across key digital channels, such as:

• Content marketing and search engine optimization (SEO)
• Paid social media and influencer marketing
• Paid search
• Email and customer relationship management (CRM) tools
• Events and research
• Design and creative

This breakdown can vary based on your industry, business objectives, and growth stage, but it offers a useful starting point for balancing your performance marketing, brand-building, and customer engagement.

This allocation reflects a balanced strategy that supports short- and long-term marketing goals. Depending on your specific objectives, you may choose to invest more in paid search and social advertising for quicker growth. Alternatively, if your focus is on building brand authority and inbound traffic, you might spend more on content marketing and SEO to achieve stronger long-term ROI.

Create Your Digital Marketing Budget

While it can be challenging, budgeting’s importance is undeniable in business. Understanding costs and returns is essential for crafting strategies that aren’t just creative but financially sustainable and able to achieve business objectives and goals.

One of the most effective ways to learn how to create your digital marketing budget is by enrolling in an online marketing course, such as Digital Marketing Strategy. Through real-world case studies and interactive exercises, you can develop the digital marketing skills to make financial decisions that best serve your brand.

Do you want to dive deeper into marketing budgeting? Explore Digital Marketing Strategy to discover how to allocate funds throughout the customer journey. If you’re interested in exploring online education but aren’t sure where to start, download our free guide to online learning success.

This post was updated on August 5, 2025. It was originally published on February 22, 2024.