How much budget should you alot for Social Media Marketing?


As we all know, businessmen treats social media as gold dust in their pursuit to broaden their business scope. Almost all businesses use Facebook, Twitter and other social networking sites to maintain their online presence. In this article, we will see how much money you should invest for Social Media Marketing for your Business.

Factors to Consider

There are quiet a few factors to consider first before you can allocate the budget needed for social media marketing. There are many available platforms out there that you can use, and duration for your marketing efforts, profit and budget, and industry you belong should also be considered. But perhaps a good accurate tool will be a formula which we will discuss in a bit.


There are many platforms that you can use like printing fliers or posters, radio or TV, yellow pages, direct mail, and business booths or bazaars etc. But all of them are perhaps expensive and not the in thing right now as they are quite outdated and not that efficient.

Social Media Marketing

Social media sites like Facebook and Twitter will be very good alternatives for marketing as they are free, easy to use, and reaches out to more people easily and quickly. In Facebook, creating a page for your business and inviting people to like it will always be a great idea. Creating a Twitter account and creating interesting content to lure in followers will surely help your cause.


Of course, the length of time you plan to do marketing will weigh in too. The longer the duration, the more budget will be required. Also, a good approximation of how long your customer stays loyal with your business will also be a key which we will discuss too in a bit.

Your Profit or Budget

Ask yourself, how much can you really afford to spend for marketing? Do not spend yourself into a hole, especially today in our hard economic times. There are many web options out there that can boost your business’s presence without spending a single peso. A good rule of thumb too is that you may use up to 10% of your profit or sales in marketing. Logically, you can spend more for marketing if the business is doing well, and consider paying big for radio or TV commercials once your profit balloons to epic proportions as it will surely help. If budget allows, consider inviting and hiring famous celebrities to easily lure attention!

Industry you are In

It will be a good idea too to know your competitors and get a feel of how much they are spending or how active they are in their efforts. A good action will be to ensure that you are reaching out to more people than your competitors. The customers will always be your life line to stay alive so ensure you are reaching out to more if possible.

Lifetime Customer Value

Now, here is a more technical and efficient approach to allocating your budget for your marketing efforts. The Lifetime Customer Value (LCV) is the net present value of the cash flows attributed to customer relationship. This value is a metric to place emphasis on customer service and long-term customer loyalty or satisfaction rather than maximizing short term studies or sales. Being able to compute for the LCV will answer how much budget you should allot for social media marketing for your business!

Use the formula below to compute for the LCV:

LTV = (Frequency of Purchase) X (Duration of Loyalty) X (Net Profit)

Social Media

Now, let us dissect the variables of the equation. For frequency of purchase, you can use any unit of time like months or years like units sold per month or units sold per year. You can estimate or survey your customers to get the units sold per month or year. Same goes for duration of loyalty, you can survey or obtain a good estimate, just ensure that the time is in the same unit as your frequency of purchase; if you use units sold per month, use month as the unit of time for duration of loyalty and so on. For net profit, simply get your average order size per period of month or year depending again on which unit of time you used, and minus that value with the average cost of goods or service of all the units sold for that month or year. The resulting product after multiplying the 3 variables will give you the overall average total LCV for all your customers. Then this monetary value will be a good basis for how much you should set aside for all your social media marketing effort to lure in all your customers.

So there you go! Take note of all these info, especially the lifetime customer value as this will surely give you a safer gauge to avoid overspending for a marketing cause. If Facebook and Twitter are not enough, or if your profit is so big that you can already spend more for marketing, then do so but make sure to refer to your LCV!

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