Budget Smarter: 3 Useful Allocation Tactics to Optimize Paid Media Spend

January 24, 2019

Determining the correct timing and distribution of media budget is often an overlooked optimization lever but (as account segmentation and targeting continue to diversify) remains highly impactful for true digital success. 

Below are three useful, time-based strategies to consider during your next budgeting brainstorm to help shift your brand message into performing audiences depending on seasonality, product/offering and daily performance.

Re-Evaluate “How it’s Always Been Done in the Past”

Just because you (or someone else) always allocated budgets a certain way doesn’t mean that should continue. Key things to consider: Has the product/service business model changed or evolved? Are there new or different KPIs/goals? Can you do anything different with budget allocation to help grow the business? Maybe everyone was happy with the current or old way, but that shouldn’t stop you from trying to improve.

As you get started, consider this important — somewhat obvious — detail when re-evaluating your budget strategy: the industry! For example, are you advertising a retail business that converts a lead to a sale within a day or two or a real estate or education company with a 30-to-90-day conversion window? Simply defining this as your first step will break you from your traditional methods of budgeting (seasonality, historical budget allocation, evenly distributed budgets, etc.)

Let’s dig in a little further on three key factors of smart budgeting:

1. Monthly Budgeting

If the business typically converts leads to sales within a few days, the budget should be allocated by month based on  sales goals for that month. Seasonality is an important factor, as is historical monthly performance trends. You may want to allocate more budget in December (typically a higher sales month with higher sales goals, more competition, the holiday season, etc.), and less in other months depending on the product they sell (ski gear vs. bathing suits, for example).

2. Latency Budgeting

If the business typically converts leads to sales over a period greater than 30 days,  the budget should be allocated in a way that accounts for this latent period between a lead and a sale. The budget for one month, say February, should be set to drive the number of leads needed to fuel sales goals in April and May. Smart budgeting!

Tip 1: Don’t ignore historical performance trends entirely under this budgeting approach. To fully develop this latency budgeting model, consider historical lead to sale conversion rates by month, average time from lead to sale, and average cost per lead.

Tip 2: Continuously update and be agile! Cost per lead and average length of time from lead to sale can vary. You also may be over-delivering or under-delivering to goals. Update, revise or move budgets around from one month to the next based on the latest data.

Early Results: The Search Agency has implemented the latency budgeting approach with a partner who typically sees an average of 30 to 60 days between a lead and a sale. The results are already proving effective. Cost per lead has declined 10 percent, allowing for nimbler budget allocation across months as sales goals change based on market conditions. This is ultimately leading to more leads than projected and on-pace delivery of sales goals.

3. One Last Step: Don’t Forget Daily Budgeting!

After finalizing your media plan and budget allocation strategies, don’t forget one last critical budgeting exercise! If your budget is typically constrained, routinely monitor how quickly budgets are depleting each day and how much traffic you’re missing out on due to daily constraints. Analyze how many more leads, and ultimately sales, could be generated at different spend levels. This will truly maximize your return on ad spend!

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