Social media may be a cost-effective channel for many companies, but, nothing in life is free. Even if you forego supposedly expensive items like influencers or elaborate video campaigns, there are many different costs to consider when beginning any sort of marketing campaign, including social.
As an integral part of the marketing budget, social media can have several significant cost factors. These can be both obvious and less obvious ones that many marketers forget about when planning.
To make sure this doesn't happen to you, we'll clarify which hidden expenses you should definitely consider in your social media marketing budget. No matter if you are a small, medium, or large company, a social media strategy with corresponding budget planning is essential, so let's get to it!
How high should a social media budget be?
As with most things marketing-related: the answer is that it depends on your company's goals.
For example, if aggressive growth is being pursued or a product launch is planned in the near-term, a higher marketing budget may be appropriate. Other determining factors include company size, industry, strategies, competition, existing social media presence, and available financial resources.
To roughly calculate your social media budget, you can use the rule of thumb for calculating general marketing budgets, which in the B2B sector can be located between two and five percent of revenue.
In the B2C sector, five to ten percent is considered appropriate. According to the Bitkom Study 2022, the industry average in Germany is 4.5 percent of revenue.
There are two ways to make a general marketing budget:
These include social media costs...
1) ...as a percentage of sales (see above).
2) ...as an element of customer lifetime value
Especially if you already have historical social data, the second way - deriving the marketing budget by customer lifetime value – is often the more accurate one.
This allows you to determine how much to spend on new customer acquisition by calculating the long-term value of a customer.
Taking into account the above, you can derive your marketing budget from the factors listed and define goals accordingly in order to increase your sales!
And your social media budget?
Here you basically have the same choice of options. In both cases, it helps to first define goals for your social media marketing. How many leads do you want to generate? How many orders in the online store should be generated through social?
If you know how much social media should contribute to achieving your goals, it will be much easier for you to derive a percentage.
You can of course refine the second calculation from above by limiting the calculation of customer value and ROI (return on investment) to the customers who found you through social media. Read my colleague Brian's blog article to learn more about attribution models in social media.
Identify all relevant social media cost centers
When creating a social media budget plan, various cost centers should be considered. The exact structure of the budget will depend on the specific goals, size of the business, and planned social media activities. Below are some important cost centers that may need to be considered for your social media budget:
Personnel costs
Salaries: Does your company have one or more dedicated position(s) for social media management? Great! Then you can include the corresponding salary one-to-one in your budget planning. If several employees devote their working hours to the maintenance of the social media channels, try to estimate and calculate the time required.
Depending on the scope of tasks, it is also worth considering the additional positions, such as for a working student who could cover, for example, community management.
Outsourcing: If you have outsourced various tasks such as community management or content creation to freelancers or agencies, these items also could fall under personnel costs. The prices here depend heavily on the services - as a general idea, you should expect anywhere from 450 - 4500 euros per month (plus VAT) when hiring an agency.
Training: Social media is a very fast-moving environment, so it is important to invest in the training of your employees so that they stay up to date and can get the best out of your channels. This includes workshops, courses, webinars, and more.
Content creation
Content creation for social media can also be a significant cost center. The exact amount will depend on factors such as the type of content, complexity, quality, and internal or external resources needed.
Here are some social media expenses that can be incurred during content creation:
Copywriting: If you need high-quality copy for your social media posts or ads, there may be costs associated with professional copywriters. Costs vary depending on experience and the scope of the copywriting. In addition to the creation of the content, proofreading is usually also carried out. In international corporate contexts, costs may also be incurred for translations or cultural adaptations of the posts.
Graphic design: For appealing visual content such as graphics, infographics or illustrations, you may have to pay graphic designers or design agencies for your social media posts. This could also be categorized under personnel costs.
Images: You can save a lot of money by using royalty-free images from sites like Unsplash or other cheap stock images. Otherwise, there are license fees or costs for hiring external photographers. With the latter, there are additional production costs - e.g. for models, location rental or props. Likewise, costs are incurred if the buyout rights for the photographic material need to be extended. Travel & catering costs are also a factor in the budget planning that should not be neglected.
Video: For video productions, there are additional costs on top of the production costs for the footage. Producing videos for social media often requires additional resources such as video producers, camera operators, actor:s, props and post-production services. Costs can vary widely depending on the length, quality and scope of the video. And even if smaller companies only have their cell phones, colleagues, and offices, they should at least plan for extra compensation for the unrestricted right to use the video.
Video can quickly become a very expensive endeavor when done well. But there are ways to keep costs down and create brilliant works on a shoestring budget. We wrote a lengthy guide to short-form video such as IG Stories and TikTok. You can grab it for free here and find out how to save money on your video strategy.
Hardware & technology
Other social media costs come from purchasing basic hardware to operate effectively. Here are some important components:
Computers: A reliable laptop is essential to navigate social media platforms, create content, schedule posts, manage your community, and perform analytics. Make sure your device has ample storage, a fast internet connection, and good performance.
Smartphone or tablet: A smartphone or tablet are handy for staying active on social media channels on the go, responding quickly to notifications, reviewing content, and making spontaneous video recordings, or livestreams. These devices allow you to interact directly with the community and keep an eye on current trends.
Camera: A high-quality camera is beneficial for taking professional photos or videos for your social media content. Depending on your needs, you can use a digital camera, a mirrorless camera, or even a high-quality smartphone with a good camera.
Lighting: If you choose a professional camera with depth of field, you leave the "real life" character of smartphone shots anyway, which is why you then add costs for the light and audio recordings.
Optional: Other potential creative costs could include a studio, screen, computer accessories, microphone, tripod, external hard drives, green screen background wall, etc.
Luckily, many of the costs here can also be applied to your other content marketing needs, meaning you may be able to share the budget!
Software costs
For effective social media management, there are a variety of software solutions available that can help plan, manage, and analyze social media activities. Here are some important software categories and tools that can be useful for social media:
All-in-one platforms: Social media management platforms, like Facelift, allow you to centrally manage various social media channels: This includes content planning, community management, KPI reporting and also competitive analysis.
Design tools: For outstanding content on social media, most companies use design tools like Canva or Adobe Creative Cloud. There are licensing costs for these. Templates, graphics, custom fonts and designs with various editing functions reduce the time required for content creation enormously.
Optional:
- Social listening & monitoring software (especially for large companies or sensitive areas).
- Influencer marketing platforms (useful if many influencer collaborations are part of the strategy)
- UGC platforms (for easy management of user-generated content)
Paid social budget
Depending on your goals, target groups, and competitive environment, it may make sense to run ads or push posts on social media platforms to reach people outside your follower bubble. It's best to decide for yourself which platform is right for you. The available ad formats, targeting options, and reach vary widely. Once you know which social networks you want to run ads on, get benchmarks for cost per click (CPC), cost per thousand impressions (CPM), or other relevant metrics to get an idea of the cost per campaign.
Based on the above factors, you can determine your paid social media advertising budget. A common method is to set a percentage of your total marketing budget for paid social media. The percentage can vary depending on your industry, company size, and goals. A general guideline for Paid Social Media is a budget of about 10-20% of your overall marketing budget. In our experience, at least a mid-triple-digit amount should be set aside for testing to truly identify trends.
It is advisable to start with a smaller budget and then gradually scale up depending on the results and ROI achieved. By continuously reviewing and adjusting your budget, you can ensure that you are investing effectively in paid social media advertising.
Strategy & consulting
Especially when your social media efforts are still in their infancy, your social media budget can sometimes be hit with significant costs for strategy and consulting.
The exact costs again vary depending on the desired services. Especially before kick-off, consulting around market analysis, concept development & target group analysis can be useful.
If you are still new to the social media game, you can also benefit from a steep learning curve by working with agencies or consulting service providers and gradually take on more responsibility yourself.
Other social media costs
The social media budget may include other miscellaneous costs in addition to those already mentioned for paid advertising, content creation and strategy/consulting. Here are some examples:
Sweepstakes and contests: If you run sweepstakes or contests on social media, there may be costs for prizes or giveaways, shipping costs, platform fees for special sweepstakes apps, or working with partners for co-marketing campaigns.
Sweepstakes can also be a motivator for your employees as corporate influencers. You can learn more about how this works and how you can take advantage of your greatest asset for employer branding with our free web guide.
Influencer Marketing: If you want to use influencers for collaborations and partnerships, there may be costs for the collaboration. These can be fees, costs for products sent to influencers, or commissions for affiliate marketing.
Summary
Careful budgeting for social media campaigns is essential to ensure the success and efficiency of marketing activities. When deciding how and where to allocate your marketing budget for social media, take the above considerations into account.
We know it's a lot. It's one of marketing's most famous myths: social media is cheap! If done right, it can certainly be more cost effective than many other more traditional forms of marketing, but the hidden costs add up, so don't be caught unaware.
