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eCommerce Budgeting in 2020: Your 5-Step Plan
You know what they say, “New year, new budget.”
Okay, maybe not. The New Year is a prime time for making resolutions, though, and the best way to achieve your resolutions is with a plan. For eCommerce sites, a good plan starts with a good budget.
Below, we walk you through the five steps you need to take when creating your eCommerce marketing budget. (Here’s a little secret: you can use this plan any time of year. In fact, we recommend reviewing your budget at least every quarter.)
Let’s dig in.
1. Know Your eCommerce Goals.
First, define your eCommerce goals for the year. Is it more sales volume? More sales revenue? More profitability overall?
The goal you choose affects the steps you need to take next, and how you’ll organize your eCommerce budget. If you want to be more profitable this year, you might consider raising your prices, expanding your product line, or investing (or reallocating) your marketing spend. You might do a mix of all three.
If volume is your goal, you might decide to host more promotions, and to increase your spend on social media advertising to get out the word. It all depends.
For now, though, define your goal for 2020. Use your previous year’s sales numbers as a benchmark, and forecast a reasonably higher number from there.
2. Calculate Your Overall Profit Margin.
Next, define your profit margin. This is essential to understanding how profitable your business currently is, so you can determine which levers you’ll need to pull to reach your sales goals this year.
Your Gross Profit Margin (GPM) is calculated by taking your net sales, less the cost of goods sold in the same time period, and dividing the difference by net sales. Put another way:
[ (Net Sales) – (Cost of Goods Sold) ] / (Net Sales)
This number represents the percentage of money you take home from each sale on your eCommerce site.
3. Recalculate Your GPM by Channel.
Your overall profit margin helps you understand the current financial health of your eCommerce site. That’s great. When budgeting for eCommerce marketing spend, however, it’s more useful to know the GPM by channel.
Each marketing channel has its own unique cost per acquisition, conversion rate, and even customer lifetime value. Calculate the GPM for each marketing channel you’re currently using based on the sales data you have from the past year.
With your current GPMs on hand, you can now reverse the calculations to determine how much more you need to spend in each channel to reach your 2020 goals. Simply reverse the calculations like so:
Goal Number of Sales = Expenses / (Average Order Value x GPM)
4. Reallocate Your Channel Spend.
There are always ways to squeeze more value out of your current marketing channels, but you may want to consider if it’s time to expand into some new ones.
Each year brings new marketing trends, and getting ahead of the trend is usually good for eCommerce—since customers haven’t been burned out yet.
In 2020, it’s all about social commerce. Increasingly, shoppers are using social media to discover new products. 70% of shoppers use Instagram to find new products, with 130 million users tapping on Instagram shopping posts every single month.
Instagram’s not the only platform where social commerce is thriving. There’s Facebook, Pinterest, YouTube, and more. If you’ve got an online shop and great product photos (bonus points if some of those photos feature influencers), there’s no excuse for not having a paid presence on these platforms. Here’s what we recommend investing in:
- Facebook Messenger Ads: Chatbots are great for tackling basic customer service queries, but they can also serve up personalized product recommendations. With a strategic approach to Facebook Messenger, you can help your customers find what they’re looking for faster and suggest upsells while you’re at it. Learn more here.
- Shoppable Posts and Pins: Instagram Shoppable Posts allow you to tag your products directly, hooking users with a compelling photo that feels social and personal, not commercial. On Pinterest, there’s Shop the Look Pins, which allow you to tag different pieces in a Pin with the direct link to your eCommerce product page. Learn more here.
- Vertical Video: Content is always in demand, but we’ve seen a shift toward video marketing in the past few years, specifically vertical video. It’s no surprise: social platforms are driving social commerce, and vertical video is naturally more watchable on social, given that people use their smartphones to browse social media. Some studies find vertical video drives over 150% more total watch time, for a lower CPC and higher engagement.
Pro Tip: Don’t forget about seasonality as you plan your marketing spend for the year. You’ll want to account for seasonality when planning your spending, so you can make the most out of more profitable eCommerce periods like Black Friday.
5. Grow Your Team and Tools.
To achieve these marketing goals, you need to have the right people and the tools. It might be time to upgrade to a full-fledged marketing software platform like HubSpot. Or, if some of these channels are brand new to you, you’ll want to hire experts in video marketing and social advertising.
Digital marketing experts know how to get the most out of these platforms, and ensure you enjoy the best ROI on what may be limited marketing spend as you experiment with new channels. They can also advise you on the right marketing software, based on your budget and goals.
Turning Your eCommerce Budget Into Action
Congratulations! By now you’ve outlined your eCommerce marketing budget for 2020. There are exciting things on the horizon. Now it’s time to make them happen.
That’s where Your Marketing People comes in. From creative and content to reporting and analytics (and everything in between), we live and breathe eCommerce marketing. Let’s talk about your 2020 eCommerce marketing plan.
