Marketing budget allocation

Marketing budget allocation, or media budget allocation, is the decision at the centre of a media plan: how much goes to each channel, in each period, and why. A spreadsheet records the allocation. It does not say whether the money on paid social would have returned more on video, nor at what point a channel stops paying back. Marketing budget optimisation is the method that answers those questions, and it starts from the return on the next euro.

A channel’s return follows a curve: beyond some point, each additional euro returns less, until saturation. Allocating a budget means comparing channels on the return of their next euro and directing spend towards the highest expected return, allowing for uncertainty and for each channel’s constraints. Marginal incremental ROAS is that return; the response curve of each channel shows how it changes with spend. Average ROAS does not answer the question, because the average includes the euros that were spent when the channel was fresh.

Where do the curves come from? When the brand has enough history, from a media mix model. When it has none for a channel, from an audited benchmark registry, provided the plan says which figures are borrowed. In both cases an experiment measures what the advertising actually added, and calibrates the model. Each allocation then has a projected return with an uncertainty band, and a projected lift whose band crosses zero is reported as not distinguishable from flat.

In the Media Planner, the Plan view reads each channel’s marginal return off its curve at the committed spend, so budget moves from channels that have saturated to channels with room, and the Tune view sizes each reallocation on the slopes. If you are writing the plan itself, the media planning guide walks through the steps with a template.