How To Pick A Budget For Web Design And Development Based On Value

By Pete Czech

How To Pick A Budget For Web Design And Development Based On ValueNew Possibilities Group

After 15 years of being in the web design business, I can state unequivocally that most businesses have no sense of the value their website provides and have no idea what an appropriate web design & technology budget should be.

Here is a typical case in point: I can’t even count how many pitches and web design discovery sessions we’ve performed onsite at client locations, where we were amazed at the infrastructure of the company. The office space, the furniture, the art & decoration. We’ve seen offices with great views, exotic decorations (including life-sized terra cotta warriors), expensive tile and lighting fixtures in buildings that must cost an arm and a leg. Yet, these are the companies most likely to skimp on their website design and development budget.

One recent meeting we attended was in a conference room that was easily 2,000 square feet. A large conference table, surrounded by comfortable leather chairs. The cost of this room must have exceeded $75,000 or more to build. Yet it was hard to convince this company of nearly $50 million in revenue that their website was worth a development budget of $25,000. I wish I was making this up. That came out to .05% of their revenue.

Why the web design industry is to blame for the oversight on value.

How can a company undervalue the only avenue that they have to represent themselves to a wide audience, yet at the same time overvalue the infrastructure that customers will never see anyway? For starters, I blame the web design industry as a whole. 

The industry has done a horrible job of marginalizing the value of the services that it provides. And as a result, agencies are being compensated at a market value which is brought down by the plethora of crappy, inexperienced agencies that are flooding the market. And we all know who these agencies are: shops that take templates off-the-shelf, repurpose software, and produce look-alike websites for clients who simply don’t know any better. These relationships typically end in dissatisfied clients and make it harder for legitimate agencies to clean up the mess left behind.

To the defense of clients—they simply don’t know what they don’t know. In most cases, it’s a marketing chief or their team that will find multiple bidders. Because most agency sites are decent, they judge the companies they pick on those first impressions. But, as they talk to the agencies, they see a vast amount of pricing divergence. With some “research”, the client will narrow down to what they see as an acceptable range for their website design. And this road is the pathway that leads to ongoing trouble.

What it takes to understand how valuable your website truly is.

The most important thing to remember, especially for a midsize company, is that your website will always be the #1 method of attracting, educating, and converting new customers. There simply isn’t a better way. And if you are a small or mid-sized organization with large competitors, you have to understand what resources those competitors are throwing at their websites. It is substantial.

As an example, if you are a small manufacturer of golf clubs - maybe putters. You have a terrific product and you know it tests well against the biggest players. Your most immediate available outlet to sell your product and push it will be online. However, look at your competition: Titleist, Taylor Made, and Calloway may be spending millions of dollars per year on their website and web marketing. And, add to that professional endorsements!

Does that mean you cannot compete in the space? The answer is a resounding YES you can! But it does mean you have to be smart and realistic about what amount of budget and resources to throw at your website and marketing efforts. Examples of mass interruption via online marketing are all around us.

Casper is selling mattresses online, interrupting an industry that has been set in its ways for many years. And, Dollar Shave Club used aggressive online marketing, intuitive web design, and aggressive social media campaigns (including those snazzy videos) to interrupt a billion-dollar male grooming industry (and they were acquired for more than $2B to boot!).

How to evaluate your website budget.

The best way to evaluate your budget is to work to calculate the return on investment. ROI is always a popular acronym but in the case of your website it is easily calculated and realized. Modern analytics, marketing automation, and advertising systems make analyzing the ROI of an online business easy to figure out.

Recent studies suggest that companies with revenue from $25-$99 million spend on average 9% of their revenue on marketing. For a $25-million-dollar company, that is $2.25 million on a marketing budget.

Now, think about your means of marketing. There are old-school, offline methods such as direct mail (typically even that requires an online conversion), events, and old media advertising. But the most trackable method for many companies will be online advertising. And regardless of the means of online marketing—your destination website must be technically and visually competent to convert new leads and customers.

So what SHOULD you spend on a proper website? Our best guidance is to spend 1% of revenue on technology including website design and ongoing continuous improvement. The reason for this is that today, website design is an ongoing process. The industry is moving away from a 2+ year upgrade cycle. Today, redesigns followed by ongoing tweaks and continuous improvement based on analytics and performance is the best way to get a steadily improving website that increases leads and sales. 

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