Marketing Budget Allocation
One of the important use cases of MMM is the Marketing Budget Allocation. The results of MMM are directly leveraged to provide various ‘What-if’ budget allocation scenarios.
Such as:
โช๏ธ Under the same budget, how could we have allocated the spends across media differently to yield a lift in KPI?
โช๏ธ What should be the allocation across media if there is a 30% increase in budget?
โช๏ธ What if we decide to cap media A’s allocation to 10% of budget, what would be the net effect on KPI?
While the clients are normally happy to see these results, one question that most clients as well as prospective clients ask is:
“Can we get the best allocation strategy on the press of a button?”
While us marketers wish for such a solution, but in reality, such a solution is not feasible.
The ‘best allocation strategy’ is very subjective. The domain of Marketing is highly dynamic, there is no one single best strategy but many.
What the optimization provides at first is a mathematically feasible and optimal solution. One can think of it as a good starting point that is also close to the finishing line.
When it comes to deploying the right media strategy there is no one ‘best’ solution. Different marketing strategies could end up giving the same incremental Lift.
It is more or less like a game of chess, there are many ways to achieve checkmate.
The optimization algorithm hence provides all the knobs and levers to the user so that the user can arrive at a solution which they can deem as ‘optimal’.
This is where the famous saying: Marketing = Science + Art, holds true.
Setting constraints and allocating a budget is more art than science. The constraints can only be set with a good domain understanding.
So, good domain understanding + budget optimization tool = Best Budget Allocation๐ฏ.
