How Much Should I Be Spending on Social Marketing?

(Part 2 in our series on "Getting Started in Social Marketing")

Over the last year, just about every brand has accepted and embraced that Social Marketing is a “must have,” not a “nice to have” program in their marketing arsenal. But one aspect that still faces boardroom controversy is how much to actually spend.

Remarkably, while any simple google search can return 3500 articles on “How to make social media work for you,” there are relatively few resources that give you hard data to take to the CEO. Based on our experiences, and a few pieces of data we’ve pulled from research reports, here’s at least a framework you can work around.

The Top Line Overview

On a very high level, social marketing has moved out of the “Discretionary Spending” or “Special Projects” line item of the overall budget and garnered its own classification. Qualitiatively, we hear people spending around 5% to 10% of the advertising budget on something that involves “social.” Some reports, such as this one from Avenue Social claim 3-6% of overall ad spending. (Note that the number is 3-6% of ad spending, not marketing spending.)

Now it’s hard to decide how much that number is changing in 2010, since a Coremetrics report about 2008 spending found, “78% marketing professionals saw that social media marketing was a way of getting an edge on their competitors. However, just 7.7% percent of their total online marketing spend was allocated to it compared to 33 percent to online advertising and 28 percent on online promotion design and implementation.” Also notable, is the statistic that

just 10% of companies are not engaging in any social media activity whatsoever.

Comparison to Your Overall Marketing Budget

One thing we can’t forget about is the size of your company’s overall budget. In 2008, the average cost of TV production for a 30 second spot was around $303,000 just to create it. If this is the scenario in which you market, it’s pretty easy to cut development of one spot and suddenly have $25k per month to spend on staffing an internal social marketing team.

Some companies are paralyzed by a lack of resources, accoriding to this report at Marketing Charts. The report says that more than half of companies (54%) say resourcing is a significant problem, and 9 out of 10 businesses (90%) say social media is taking up more time internally than a year ago. This indicates that before launching a social media program, some sort of staffing and training initiative is necessary.

The ROI Question

The research at Marketing Charts also found, “That many companies are experimenting with social media without yet reaping any measurable benefits. Only one-fourth of companies say that they have gained “real, tangible value” from social media, whereas 60% say that they have gained some benefit but nothing concrete.”

But the Econsultancy study found that, “More than half (52%) of companies who are heavily involved in social media marketing say that they have gained real value, compared with only 13% of companies who have “experimented but not done much.”

One way to interpret this data, is that companies need to spend money tomake money, and those that invest and make Social Marketing a real part of the budget are rewarded.

Brands of All Size Increasing Budgets

Forrester estimates at least give a perspective, if not actionable insight, to what the market as a whole will be doing.

They say, “B2B interactive marketing spending will climb to nearly $4.8 billion in 2014 as interactive channels continue to grab a larger share of the marketing pie. B2B marketers will continue to invest heavily in paid search but will also begin to invest in display advertising and emerging marketing tactics such as social and mobile marketing. In order to make the most of these investments, B2B marketers should focus on creating online customer interactions — not just driving leads — and develop a central team to direct emerging media strategy.”

So with all these considerations and estimates, at least 2 companies are coming out and talking about what kind of bets their placing. Australian Discount Airline Jetstar says it will direct 40% of its marketing budget to social media. “We’ve conducted some very successful marketing and PR campaigns via social media in the past 18 months, including YouTube and Twitter, and the response has been phenomenal,” said David May, Jetstar’s head of marketing.

While the top marketers in the world aren’t going to go up to 40%, their increases are becoming significant. Ad Age reports that Unilever says, “In the U.S., where people are spending 25% of their time in some sort of digital engagement, then you should be proportionate. ... You will find that we will be in the 20% areas in markets like the U.S. And you will find we'll be in the single [digits] in markets that are less developed. The company spent only 4% of its $864 million in measured media last year on internet spending, according to Kantar Media, and even doubling wouldn't get it to 20% this year.” However roughly 8-10% spend on digital indicates significant dedication to social. Likewise, P&G, which also doubled its measured U.S. internet spending last year to $100 million, estimates digital is above 10% of its marketing budget.

The Net Net

In conclusion, it’s become fair to estimate that an established company with integrated marketing campaigns, will be spending from 3-10% of their overall marketing budget on social marketing. That number may encompass full-time employees serving roles in community management, the licensing of analytics tools, and application and mobile development. But the good ROI tracking that comes with significant budget outlays should drive crisper, more efficient budget analysis in 2011.