Roy Williams, the founder and president of ad agency Wizards of Ads, details in Entrepreneur three steps to calculating a marketing budget: Take 10 percent and 12 percent of your projected annual, gross sales and multiply each by the markup made on your average transaction then subtract the rent for your operation. This gives you a minimum and maximum ad budget. How much of that budget to put toward a social media campaign is a little more complicated.
Understanding Your Target Audience
You probably will not hit a target if you do not aim. Understanding your target audience is the marketing equivalent of putting a sight on a gun. This is especially important for social media as some demographics are more likely to use the Internet than others. Using social media as a marketing channel to sell walkers to the elderly is probably a waste of funds — statistics show that people over 65 are least likely to use social media. It is best to research your target market, evaluating its social media network habits.
Size Matters
For a small business, the size of the demographic can define the budget. A tutoring service company located in a small community may want to devote most or all of its budget to social media marketing. Facebook advertising is highly scalable to the demographic. Our tutor can place Facebook ads that are seen only by females, ages 17 to 22, that live in the community. Since these kinds of ads are billed by the impression, this type of tightly targeted marketing can provide a huge bang for the buck. For as little as $50 per month, an advertiser can get several thousand impressions in front of potential clients. Look for ways to increase your cash flow then use this money to deepen your market penetration.
One of the problems with social media marketing comes when the demographic target becomes very large. Several billion people use social media every day. Facebook alone has about 1.3 billion users. Trying to get your ad in front of every one of these users would cost millions of dollars. So choose your battles. Target a small population, devote your campaign budget to saturating it then move to another demographic.
Know Your Competition
A simple way to establish a marketing budget is to look at what the competition is doing, then do it better and cheaper. Much of marketing is about differentiation. Look at the others in the field and identify the differences between your company’s offerings and everyone else’s. If there is no benefit from your services then this is a huge marketing dilemma. Look at Blockbuster as an example.
Use your social media budget to highlight the benefits of your company. Do not waste ad text, with its associated Web real estate costs, telling everything that your company does. Pepsi does not talk about carbonation processes or the history of soda. The company shows a taste test and delivers the message that they are better than Coke.
Marketing Is Not Just Advertising
American author and marketer Seth Godin once said that marketing is a contest for people’s attention. Marketing is more than simply advertising a product. It creates a story or conversation about the company and its people. It is here that social media excels as a marketing channel. Facebook and Twitter pages cost a company nothing but they allow a forum to create a wonderful conversation. Companies that have a corporate culture of social responsibility can leverage this and it will cost them nearly nothing.
Coffee giant Starbucks ranked as the 5th most socially responsibly company, according to a CNN Money poll. This corporate culture is the centerpiece of the company’s social media campaigns. With more than 35 million likes, its Facebook page vacillates between the newest coffee flavor and its stance on gun safety. By using social media to promote beliefs about what makes a good coffee drinking world, Starbucks has gotten others to talk about the company. Traditional news media, opposition groups, and fans have shared links to the Starbucks page. None of this has cost the company a dime, but got people’s attention.
Author Bio: Paul Reyes-Fournier has served as the chief financial officer for social service organizations, churches and schools. He created his own marketing firm, RF Media. Paul holds a B.S. in physics and an M.B.A. 
