Many firms don't have a budget for search engine marketing (SEM). CyberAtlas reported last Fall that 58 percent of the marketers surveyed allocated less than 1 percent of their annual marketing budgets to SEM; however, 20 percent allocated 25 percent or more.
The study also reported 62 percent of marketers received 50 to 75 percent of their visitors from search engines. So why are so few marketers budgeted for a marketing strategy that brings both visibility and targeted traffic to convert? Perhaps it has to do with planning.
Planning Your Marketing Budget
Research shows that on average, U. S. corporations allocate 6 percent of gross revenues to their marketing budgets. The rule of thumb says 4 to 10 percent of gross revenues is necessary for an effective marketing budget. The amounts allocated range from 1 percent for industrial B2B firms to 10 percent or more for consumer packaged goods, which can run considerably more with new product intros.
While large corporations give a lot of thought to budget planning, many small to medium enterprises don't. Some will estimate sales revenue, cost-of-goods, and other expenses, then allocate what's left over to the marketing budget. What might work better is to estimate what your competition is spending and try to match that.
Using an industry average of 6 percent, your marketing budget for every $1M in gross revenues would be $60K per year; and $15K (25 percent) would go to SEM. It was fairly easy to get a ballpark figure, but how do you convince your boss?
Justifying Expenses to Management
There are several compelling reasons for validating the SEM allocation in your marketing budget, to name a few:
- Most users find Web pages from search engines.
- Search engine traffic is highly targeted.
- The number of Web shoppers increases every year.
- SEM is cost effective compared to other marketing strategies.
- Search engine text links are good for branding and provide more conversions compared to banner ads.
We'll elaborate on these one by one. The most compelling reason is that most visitors come from search engines.
The 1998 Georgia Tech GVU User Surveys 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 recently 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 SEO campaigns. One case study compared SEO to banner ads and direct mail, reporting that SEO resulted in higher conversions at a lower cost-per-click and lower cost-per-acquisition.
SEM text links provide visibility 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 were more memorable than banner creative. Secondly, the number of online purchases made on sites found through search listings outperformed those made through banner ads by a large margin (55% vs. 9%).
Search engine marketing is proving to be an essential marketing strategy as the latest statistics from Jupiter-MediaMetrix show that search engine traffic increased rapidly over the past six months -- up 11 percent with 92.3 million visitors to search sites. Major search portals increased even more (Yahoo! up 20 percent with 38.4M visitors; MSN up 16 percent with 42.3M visitors; Google up 54 percent with 34.2M visitors).
Hope this gives you the information you'll need to establish a marketing budget and ample justification for including SEM. It's important to differentiate yourself from the competition, and I can't think of a better way than through SEM.
