Tourism Marketing #09: Create Your Marketing Budget & Know Where to Spend It

How to Work Out a Marketing Budget

Working out a budget when looking at advertising is not as hard as most people think. Honestly, it comes down to simple math. You’ve got to stick to what you have in the bank and your ROI. Let’s break it down ROI quickly together so you know what it is all about.

ROI stands for “Return on Investment” and, usually, you’d like to be a 5 or 4-to-1 ratio. That means that for every $1 spent on marketing you would like to get $4 or $5 back. This, of course, depends on the value of what you are selling and the value that you place toward brand exposure. If you are selling a high-end product and want to increase your brand awareness, a ratio of 2-to-1 could be good.

Do the Math as Follows

(Sales generated by your campaign – Money spent on your campaign) / Money spent on your campaign = Your ROI

As a simple example let’s imagine that you are running a kayaking tour that is worth $99 and have spent $1,000 to promote it. You can trace 60 sales to the campaign. Here is the math:

((60x$99) – $1,000) / $1,000 = 4.94 <- Great!

Now Set Your Marketing Budget

Ok, so now that this is established, let’s go over how to set a marketing budget for a tourism business in New Zealand. First, I would not spend more than what I can afford, as when it comes to marketing, there are no guarantees. The numbers that are given above as an example are for a well-run campaign and neither you nor the intern to which your account will be given at your chosen marketing company will be able to get 100% of the time.

When I started my first tourism business in New Zealand, I went over the numbers like this:

I wanted 500 clients in the first year and was confident I could get about 150 myself through my contacts. I was also confident that my two resellers would be able to bring about 50 clients each. So I had to find 250 clients. My main product was $399 so I did the math in reverse with an ROI of 3.5, as at the time I was starting and had low overheads.

((250x$399) – Marketing costs) / Marketing costs = 3.5

($99,750 – Marketing costs) / Marketing costs = 3.5

$99,750 – Marketing costs = 3.5 x Marketing costs

$99,750 = (3.5 x Marketing costs) + Marketing Costs

$99,750 = 4.5 x Marketing costs

$99,750 / 4.5 = Marketing costs

$22,166.67 = Marketing costs

Here you go, I allocated myself a marketing budget of $22,166.67 with a goal of generating $99,750 worth of sales. And every year after that, I used the same budget but increased the spending by 10 to 20% and the goal accordingly.

Admittedly, it took me until the second year to reach that ratio, as there is always a learning curve, but I had clear benchmarks to hit. It also allowed me to see which of my marketing spending were pulling their weight and which ones were not. For instance, I spent about $3,000 on some influencer content in my first year for little results so I redirected that amount on year to toward a publication that worked super well for us and we made target the second year. And this brings me to how to allocate your budget…

How to Allocate Your Marketing Budget

In my view, there are about four different areas to concentrate on when it comes to allocating your marketing budget:

• Google ads
• Social media Ads
• Online publications
• Physical marketing

I’ll give you my personal take on each of them, as well as roughly how much I would spend on each below.

Google Ads

This is by far the largest online advertisement platform and thus will probably be your highest area of spending. Google Ads will allow you to bid on selected keywords in order to get an ad placed right above all the organic results. In the beginning, this tends to be incredibly efficient when your website is not ranking high enough. Plus, it integrates well with Google Analytics so you can track conversions through your website and get a great view of your customer’s path from ad to purchase.

I would spend about a third (30%) of my marketing budget there, as Google is pretty much the first thing that people will use when looking for tourism products.

Implementation and getting started can be a bit daunting but don’t fall into the easy pitfall of reaching out to a large marketing agency that barely understands your location and your product to do all this for you. There is a great bunch of small companies that I can recommend depending on your location, so feel free to reach out.

To wrap up my take on Google Ads, there are other products such as display ads and remarketing that don’t work as well. Display ads have a very low click-through rate while remarketing ads basically make you pay Google to convert the people that have already visited your website quicker. There are very innovative ways to use remarketing ads and we do have some products available to help you with that but otherwise, I am not for it. Again, this is just my two cents on the subject, so be a free business owner and do as you please!

Social Media Ads

As you probably know already from our social media guide, I am not a big fan of the beast. However, social media ads can still yield great results as long as you focus on conversion. There is no need to run an ad to get likes or to boost a post that does not sell your product. If you spend money on an ad, you need to be able to track sales from it. On the other hand, if you want to build brand awareness through a social media ad campaign for engagement (not views) that people can interact with or through on a social media influencer featuring your business, this works best when running a campaign with locals, rather than international tourists.

In any case, running an ad campaign is always preferable to boosting a post if you want my opinion. I would spend about 20% of my budget there, depending on results. Some years it dropped to only 10-15%, as I found better places to spend my money. Again, track your results and decide.

Online Publications

Putting aside the fact that I now run the most popular online publication for tourists in New Zealand, here is how I started with advertising through online publications in the beginning.

I knew from the get-go that this kind of coverage is usually long-lasting, compared to short-lived social media posts. They provide both SEO juice, as well as referrals constantly as the search for my product grew. For this reason, I went big and spent a large portion of my year one budget there. This was simply because after the year was over, there was quite a lot of it that would stay there for cheap. I got a full page written about my business, for instance, which came at a one-off cost or a very cheap yearly renewal fee.

I also like to run highly-targeted campaigns because they can be quite cheap. Knowing that you can be featured on only 4-5 pages that specifically target travellers planning a trip to your area can be super powerful and not so expensive when compared to a generic sitewide campaign.

On my first year, I spent more than half my budget on highly-target pages, as it was a great way to be put on the map, but on a normal basis, I would spend between 30 and 40% of my budget there. Referring to the list of pages and blogs where you’d like to be featured from the “Google Yourself” article of this series, that should help you get quite a few pages in each year.

A pro tip for this would be to use a UTM link which allows you to track a link specifically in your Google Analytics, in order to know what kind of referrals you are getting from a said source.

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Physical Marketing

Finally, we get down to the grandpa of them all. Physical marketing is a generic term for a bunch of things like business cards, vehicle stickers, i-SITE fees, brochure design and print, magazines, newspapers, billboards, radio, etc. Although a bit antiquated, it is still worth spending a bit of money on those. But not all at once. You truly do not need to get a full vehicle wrap on each of your rental vans on year one – one vehicle is perfectly fine and put a car magnet on the rest, for instance.

Having your brochures at the i-SITE is still something that most businesses do, but when it comes down to tracking sales, it gets a bit harder aside from the sales made by the travel agents which you pay for in the form of a commission.

You may want to invest in posters and brochures to display in accommodations and the likes in the region. I also like to get a bunch of business cards printed to hand out to clients inviting them to leave a review about their experience or share on social media. Make it super personal by leaving a big blank section so you can write your name or a note for each of them. You can get those done cheaply on websites like Vistaprint, for instance. There’s no need to spend big bucks on this.

When it comes to billboards and radio ads. I never used them. I don’t see the use for them, so no opinion there. It’s probably good for the local market, I guess.

Anyhow, this should only take about 10 to 15% of your budget, which not a big area of concern in our constantly-connected world. Plus, to be honest, the grey cloud of the unknown that surrounds those marketing avenues is not really rewarding. I like to be able to track where my sales come from and what is my hard-earned cash spent on advertising is giving me back.