By Paul J. Bruemmer
Many marketers are in the dark about marketing budgets
and particularly about search engine marketing (SEM)
allocations. In fact, CyberAtlas reported last Fall
that 58 percent of the marketers surveyed allocated
less than 1 percent of their annual marketing budgets
to SEM, while 20 percent allocated 25 percent or more.
In this same study, 62 percent of marketers reported
receiving 50 to 75 percent of their visitors from
search engines. So we know traffic comes from search
engines. We also know this is targeted traffic because
user searches are purposeful and self-directed. So
it's hard to understand why online marketers aren't
budgeted to take advantage of this vital marketing
strategy.
Establishing a Marketing Budget
Research shows U. S. corporations allocate 6 percent
of gross revenues to their marketing budgets (on average).
The rule of thumb is 4 to 10 percent of gross revenues
for an effective marketing budget. The amount ranges
from 1 percent for industrial B2B firms to 10 percent
or more for consumer packaged goods, which can be
higher when introducing new products.
Small to medium businesses will sometimes make a
rough estimate of sales revenue, cost-of-goods, overhead,
estimated gross profit, etc., then allocate anything
left over to marketing. A better strategy is to estimate
what your competition is spending and try to match
that.
Using the industry average of 6 percent, your marketing
budget for every $1M in gross revenues would be $60K
per year, and ideally $15K (25 percent) of that will
go to SEM.
Justifying Expenses to Management
There are several compelling reasons for substantiating
an SEM allocation in your marketing budget.
Most Web site traffic comes from search engines.
Search engine traffic is highly targeted.
The number of Internet shoppers is on the rise.
SEM is cost effective compared to other marketing
strategies.
Search engine text links provide branding and more
conversions than banner ads.
The most compelling reason is that traffic comes from
search engines.
The 1998 Georgia Tech GVU User Survey reported 85
percent of respondents found Web pages from search
engines. Since then, other studies have reported 50
to 80 percent of Web site traffic comes from search
engines. Both Jupiter Media Metrix and Nielsen/Net
Ratings have reported shoppers use search engines
to find product information online.
Equally compelling is the fact that search engine
traffic is highly targeted. That's because users initiate
their searches for a reason – to find information,
products and services.
The 1998 Georgia Tech GVU User Survey reported 86
percent of respondents were searching with intent
to buy.
Another good reason for justifying the expense is
the fact that the Web continues to grow and the number
of users with Internet access is climbing. This means
more traffic on Web sites, and a good portion of these
will be shoppers.
April 2002: Nielsen//NetRatings reported 498 million
people have Internet access worldwide. In the U.S.,
66 percent of adults have Web access. Jupiter Media
Metrix reported that corporate spending is on the
rise. Ecommerce Times predicted over $1 trillion will
be spent online this year.
You need increased Web visibility to maintain market
share, and SEM is one of the most cost-effective online
marketing strategies you can buy compared to other
advertising methods.
Marketing Sherpa case studies have reported increased
revenues of 24% to 500% for companies conducting SEM
campaigns. One case study compared SEM to banner ads
and direct mail, reporting that SEM resulted in higher
conversions at a lower cost-per-click and lower cost-per-acquisition.
SEM text links provide branding while producing the
leads needed for sales conversions.
According to NPD Group, SEM performs better than
banner ads for brand recall, as search engine text
links proved more memorable than banner creative.
Secondly, the number of online purchases made on sites
found through search listings exceeded those made
through banner ads by a large margin (55% vs. 9%).
Making Your Site Visible
This should give you all the information you need
to establish a marketing budget and to justify SEM
in your marketing campaign. It's important to make
your site visible, and the best way to start is with
targeted, search engine traffic.
About The Author
Paul J. Bruemmer is founder of trademarkSEO. His articles
have appeared in numerous publications, including
ClickZ, MarketingProfs, Marketing Today, WebProNews,
SitePoint, SEO Today, SEO Consultants, MarcommWise,
Pandia, B2B Interactive and Search Engine Guide.
TrademarkSEO is a search engine optimization firm
based in Santa Ynez Valley, California and serves
clients nationwide. His company provided search submission
services to over 10,000 websites, including many of
the most prominent names in American business.
