Make a Social Media Budget: But Don’t Forget It, Manage It!

Whether you hire a paid social media agency or do it in-house, marketing through Facebook or TikTok requires money. How much do you need?

This article answers that question by covering the following:

• Average social media spending.
• Various factors that affect the budget.
• How to calculate your monthly social media budget.

In addition, how to develop and manage a social media budget to avoid unnecessary spending and costly mistakes are discussed. Read below to learn how to get smart about your budget today.

Let’s go!

If you want to learn how Digital Authority Partners can increase your PPC effectiveness, watch this video!

What Does the Average Social Media Budget Look Like?

Social media advertising is booming. Statista says average US spending could reach over $82 billion in 2025. That is about $20 billion more than in 2021, during the COVID-19 pandemic. 

Generally, companies allocate 5% to 25% of their revenues to marketing. Of these, almost 25% goes toward social media advertising. 

Many factors also affect these amounts, including the following:

     1. Company

Usually, the bigger and older the company, the more money they have for digital marketing. Statista, for example, reveals that Amazon invested over $20 billion in advertising in 2022. It included sponsored search, TV ads, and social media.

How about other enterprises? They usually start at $10,000. Mid-sized companies set aside at least $5,000 monthly. Smaller businesses mostly spend $2,000. 

     2. Industry

Below is the percentage of average social media spending in various industries:

As you can see, the retail sector spends the most, probably for these reasons:

• The industry is fiercely competitive. Brands rely heavily on social media for brand awareness and promotions. This usually requires larger budgets to make an impact.
• Social platforms, such as Instagram and Pinterest, emphasize eye-catching visuals. These are perfect for showcasing products. However, retailers need budgets to frequently generate great photos and videos. 
• Retailers leverage social media for store events, limited-time sales, giveaways, and other promotions. A larger budget ensures that promotions stand out.
• Fashion and retail trends quickly come and go. Sufficient budgets allow agile responses to social trends.
• Many retail customers are young. This demographic is usually engaged on social media, hence the need for an active presence there.

     3. Target Audience

Audience is another factor that affects your social media budget. For instance, younger markets are often more active on social media. Targeting them might require more paid ads than organic content.

Additionally, niche advertising is often cost-effective in the long term. When done right, the messaging resonates better with the audience. Your leads are more likely to click the ad and convert into customers.

The target market also influences your choices for social media platforms with different advertising costs. For example, LinkedIn, the “business network,” charges around $2 to $3 per click. Most advertisers also pay at least $0.25 for every Sponsored InMail sent.

Popular among younger generations, Instagram has an average cost per click (CPC) of less than $1. Facebook’s paid ad is about the same price but has a wider reach than Instagram.

     4. Campaign Goals

Demand generation, including brand awareness, is often more expensive than lead generation. It takes at least 12% of the initial investment because you might have to run multi-channel campaigns. You also have to consistently engage your audience to push them deeper into the sales funnel. 

Fortunately, this percentage declines as the business scales. Once you become midsize or achieve more brand stability, it drops to a range of 8% to 10%.

Meanwhile, the average lead cost is almost $200. Retaining a paid social media agency sometimes costs $20,000 monthly. It depends on the job complexity, hours worked, industry, and other specialized services that you need.

Five Solid Tips for Calculating and Managing Your Social Media Budget

How do you create a social media budget now that you know the factors influencing it? How do you manage the numbers as your business scales or grows? 

Here are five tips to consider:

     1. Look into Your Competition and Industry

Use benchmarking if you are a new business. How much are your competitors spending on social media? What percentage is paid advertising? Who are their target markets? Where do they spend it? What activities does the budget support?

There is no hard-and-fast rule in budgeting. However, most break it down into the following categories:

The percentages might already cover platform subscription fees, salaries, and other marketing costs such as equipment. Check below to see a more detailed example:

• $35,000 to $60,000+ per year for a dedicated social media manager.
• $200 to $500+ per blog post, social text or image, or video. 
• $100 per day for a small Facebook or Instagram ad budget.
• $100 to $500+ per month for subscriptions. 

     2. Periodically Set and Assess Your Goals 

Benchmarking is already a good start to developing a social media budget. However, you must customize it as your business grows and priorities change. Doing this takes more upfront effort but sets you up for better financial planning and execution in the long term.

Here are some tips to adjust your budget based on your business goals:

• Discuss goals with managers, executives, sales teams, and other key team members. 
• Assess results of past campaigns and initiatives. Which platforms, formats, and tactics performed best?
• Set concrete goals with specific metrics attached. For example, say, “Increase website traffic from social media by 20% in Q3” rather than using vague goals, such as “get more traffic.”
• Anchor goals within a specific timeline for urgency. 
• Focus on the two to three most important goals to more efficiently use resources.
• Audit your team skills, technology, and budget. 

     3. Get Creative

Starbucks is one of the few businesses that thrive despite the downturn in the economy. Its revenue increased by 8% when its fiscal first quarter ended on January 1. Global sales also climbed by 5%. 

A significant reason for the positive growth is mobile transactions. It now accounts for 72% of the business revenue, drive-thru, and delivery. It also represents 27% of transactions at corporate locations. 

However, many people miss that the drive-thru mobile payment is not exactly the store’s brainchild. It came from the My Starbucks Idea campaign, which ran for a few years. The same marketing program gave birth to free Wi-Fi.

The campaign’s premise was simple. Starbucks fans could leave suggestions to improve the store’s products and services. They could also upvote ideas they liked. 

Giving coffee enthusiasts a cheap (even free) engagement platform eventually helped build a strong Starbucks community. Most of all, it gave the Seattle-based coffee chain many ideas for its market’s needs. 

Effective social media budget management goes beyond efficient resource allocation. It must also include finding ways to save money. This requires out-of-the-box thinking such as the following:

• Activate employees as brand advocates to share company content and expand reach. 
• Partner with non-competing brands to co-create content and share production costs.
• Leverage interactive, free live-video features on Instagram and Facebook.
• Encourage user-generated content with branded hashtags and re-share the best examples.
• Use affiliate programs to incentivize partners to promote your business.
• Give away products via social contests and hashtags.
• Explore up-and-coming social platforms with lower ad costs.
• Repurpose evergreen content across platforms.
• Negotiate lower influencer rates in exchange for long-term partnerships vs. one-offs.
• Analyze competitors’ strategies and borrow their most innovative, cost-effective tactics.
• Reward loyal followers with exclusive promotions to amplify word-of-mouth referrals.
• Strengthen search engine optimization (SEO) tactics to generate organic or free traffic.

     4. Measure Your Performance

Actively tracking where funds are going and shifting resources to tactics that perform best stretch your budget further. Maximize returns by carefully measuring its performance across channels. 

First, track the right key performance indicators (KPIs). They vary according to your goals, audience, and activities. For example, click-through and follower growth rates matter during demand generation. 

However, they become less important when you shift to lead generation. By then, lead acquisition costs and customer lifetime value will have more weight.

Consider these other tips to help you evaluate your social media marketing performance:

• Set benchmarks, such as for your industry and competitors.
• Review frequently. Active campaigns require more frequent audits. Assess the budget quarterly, semi-annually, and annually.
• Use attribution modeling to understand which platforms and campaigns drive conversions and growth.
• A/B test content and tactics. Try different formats, messaging, and targeting to know which works best for your audience.
• Eliminate low-return activities. Shift it to strategies, platforms, and campaigns driving strong results. 
• Let data guide budget decisions.
• Adjust budgets quickly based on changes in performance or goals. 

Consistently measuring and optimizing your social media activities based on results takes discipline but pays dividends.

     5. Streamline Routine Tasks

Social media time and budget involve routine administrative or execution tasks. These include posting content, monitoring channels, and reporting. 

Finding ways to automate and simplify these frees up time for more strategic efforts. It also lowers costs by manually decreasing staff hours and overhead to manage routine activities.

Automated platforms, which usually use artificial intelligence (AI), have the following features and benefits:

• Social media management systems to schedule posts in advance across all channels.
• Email marketing tools to sync with your social channels and easily convert posts into email newsletters.
• Automatic reports from Google Analytics, Facebook, and Instagram to get real-time insights.
• IFTTT recipes to automate multi-channel posting.
• AI copywriting and image-generation tools to help you create high-quality content.
• Chatbots to manage common customer service queries and responses.

Summing Up

Effective social media management also includes stretching limited dollars and ensuring that they generate returns. Achieving this involves creativity and strategic financial and campaign analysis. It also demands finding the right automation tools and defining goals and markets. 

All these activities are time-consuming but worth it as they lay the foundation for sound business decisions. 

Do you need more help in creating and managing budgets? Work with an award-winning paid social media agency. Contact Digital Authority Partners (DAP) to schedule a free consultation.