Digital marketing spend in the UK continues to grow, despite the uncertain economic climate. According to the Internet Advertising Bureau (IAB), spending on digital advertising increased 5% in 2020 to reach £16.5 billion . Yet, just 60% of UK SMEs are investing in digital channels.
For the other 40%, the main barriers are cost and "a lack of knowledge and understanding about digital advertising" . In this article, we explain the options for investing in digital marketing and – crucially – how to ensure you get the best return.
Digital marketing agency or in-house – which is right for your business?
Small businesses should conduct a cost analysis to decide whether to bring digital marketing in-house or outsource it to an agency. For small-scale marketing campaigns or content marketing that doesn’t require a lot of specialist expertise, hiring an in-house manager may be the most cost-effective solution. However, if you’re planning to scale up and run sophisticated, multi-channel campaigns, an agency may be required to reach your desired ROI.
Like many businesses, educational software business Tutor Cruncher started out hiring young graduates to run digital marketing in-house. As digital natives, the graduates had a good understanding of social media and search engine optimisation (SEO). However, marketing executive Jamie Irwin soon realised that this approach was limiting opportunities. “Working with an agency means we can tap into experience and expertise across areas like pay-per-click (PPC) advertising, SEO and social media. They’re a Google partner so they have access to all the latest guidance and best practice,” he says.
Of course, agency expertise comes at a cost, and while it is possible to negotiate fees, lower costs will be reflected in the service you receive. “If you reduce the fee, an agency has the choice of spending less time on your account, or assigning it to a junior, less experienced employee,” says Nikki Hesford, owner of digital agency Hesford Media.
But it needn’t be a case of choosing between in-house or agency, says Alex Pearmain, founder of the One/Fifty digital agency. “In most cases, the ideal solution is to appoint an agency that has up-to-date, specialist skills, and to also have someone internally who is responsible for managing that supplier.” This combination of agency expertise and in-house knowledge of the business and its operations can result in the most effective digital marketing.
How much do digital marketing agencies cost?
There are two main payment models for digital marketing agencies. Many agencies work on a retainer, based on how many hours of work the agency estimates you’ll need each month. Meanwhile, some agencies charge a flat percentage of your monthly ad spend, usually between 5% and 20%, according to Hesford.
Ultimately, the cost of digital marketing depends on the strategy that is agreed upon. If your agency is simply managing your advertising, then the costs will be entirely based upon your media spend. However, Hesford suggests that, if an agency is working on a strategic programme to boost brand awareness through different digital channels, then costs can easily run to £10,000 or more a month. If you need to hire an agency for a one-off project, it may cost between between £400 and £700 per day .
The costs of running digital marketing in-house
If you’re planning to run your digital marketing in-house, employee salaries are the biggest costs to consider. A typical UK digital marketing manager earns around £46,000 per year , while a digital marketing assistant can expect to earn around £25,000 . You’ll also need to factor in recruitment and training costs, benefits and taxes.
Your digital marketing manager and/or team will also need the right tools to do the job. This means taking out software subscriptions, such as SEO research and social media management tools, email marketing platforms and video editing programmes. Costs will vary depending on the platforms and subscription levels required, but you can expect to pay around £80 per month for each tool.
When deciding to invest in digital marketing for your small business, make your budget go further with the American Express® Business Gold Card, which is accepted by Hootsuite, Buffer, and many other major marketing tools¹. For every pound you spend on your Card, you will receive one Membership Rewards® point, which you can redeem as statement credit².
While your in-house resource should be able to cover most of the day-to-day operations, there will be occasions when specialist skills are needed. The costs of any freelance resource should also be included in your in-house digital marketing budget forecasts. This could include copywriters, who charge £379 per day on average , and graphic designers, with the normal range for a mid-weight designer being £250 to £500 per day .
How to get the most from your investment
Whether you’re spending £1,000 or £10,000 on your digital marketing, you want to be sure that you’re getting the best possible results for your money.
Before an agency begins running any activity, make sure they understand your business: where your customers come from, how much they typically spend, on what products/services, and where your margins are. This will help you to agree benchmarks and set realistic goals for the relationship. It’s also important to communicate your strategic priorities from the outset, says Pearmain. “Are you looking to grow your business, increase visibility or deliver direct sales? That strategy will shape your agreement with a digital agency.”
Once the agency has started work, apply a ‘test and learn’ philosophy. This process can vary, but an example six-step process would be:
- Define your goals and KPIs (e.g. to determine the most effective ad format)
- Develop your hypotheses (ideally based on historical data, such as previous engagement reports)
- Create your testing criteria (what other variables could skew your data?)
- Test ideas with the highest potential first
- Run your tests until statistical significance (collect enough data to be able to trust the outcome)
- Turn insights into action
When Tutor Cruncher launches a new PPC campaign, the agency and in-house team get together once a month to review ad performance, including comparisons with previous campaigns and industry averages. “Some things work brilliantly, and other things don’t convert, so we can move on quickly, without spending too much money,” says Irwin.
These quarterly performance reviews are an opportunity for Tutor Cruncher to evaluate their digital agency’s overall efficacy beyond individual campaigns. “We look at how many actions have been triggered by the digital marketing from hard measures like demos and sales, to softer measures like newsletter sign-ups," says Irwin.
Consider using the American Express Business Gold Card for your investment in digital marketing. The Card can be used to pay for ads on platforms such as Google and Facebook, and gives you up to 54 days payment terms, so you have extra time to pay back your bills – and can focus on meeting your other business commitments in the meantime³.
- The first year’s Cardmembership is complimentary and from year two of your membership, a £175 annual Card fee will automatically be charged to your Account on or after the anniversary of your Account opening date.
- Membership Rewards points are earned on every full £1 spent and charged, per transaction. Terms and conditions apply.
- The maximum payment period on purchases is 54 calendar days on Gold & Platinum Business Charge Cards and 42 calendar days on the Basic Business Charge Card, it is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date.
- If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Basic Card.