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Four ways to optimise marketing budget allocation

Four ways to optimise marketing budget allocation

Today’s marketing requires a strategic, top-down approach to allocating marketing budget across all marketing mediums – direct and mass. Larry Mosiman provides four key considerations the approach must consider.

It’s no secret that marketing budgets are being slashed. The question is, what can marketers do about it? How will we 'do more with less', which is what we’re being asked to do? More importantly, will marketing emerge even stronger from today’s adversity? 

As the tough economy causes significant change in customers’ behaviour, companies with systems in place to understand and track these changes stand the best chance of prospering. Likewise, companies with established processes for making informed decisions regarding the most valuable campaigns – which ones to run when and where, and how to communicate with their most valued customers – already know how to focus their tightened budgets.
But without the processes in place, what can you do? What areas should you focus on?
Sheer volume of activities no longer determines a marketing department’s worth. Marketers must now show how they contribute to profitability, growth and long-term competitive advantage. We know that integrated marketing messages yield the best results. But how do we know which media or channels – or combination thereof – will get the message across most effectively? The multitude of marketing mediums and channels, coupled with unlimited combinations of campaigns, products and offers, makes cross-channel campaign planning a big challenge.
Today’s marketing requires a strategic, top-down approach to allocating marketing budget across all marketing mediums – direct and mass. Also critical is the ability to anticipate outcomes to make sure that the most valuable campaigns get funded. This approach should consider the following:
  1. Analyse and understand which combinations of media and channels match up against specific funnel metrics. For example, an insurance company can deploy an optimal mix of print and banner advertisements that drive an 'upper funnel' metric like 'brand awareness' yet, when optimally timed with an email marketing offer, they can also use enhanced 'awareness' to drive email response rates or web traffic, a lower funnel metric.

    As more campaigns are optimised in this 'integrated' fashion, marketers will be able to construct scorecards which measure the effectiveness of 'integrated' tactics across specific brands, products, regions, and time. More specifically, the marketer would be able to use the scores or 'correlation' value to optimise the mix based on a goal like 10% lift in web traffic or 5% increase in response rate.
     

  2. Refine your contact strategy using customer-specific information to determine who to contact under what circumstances across all planned direct campaigns and customer communications. This could include combining typical contact strategy information such as recency and frequency of contact with propensity models for purchase or response, product eligibility information based on the customer’s current situation, and other factors such as preferred communication channel or channel capacity constraints.
     
  3. Analytically compare differing scenarios and objectives to evaluate how various counts and critical measures may be affected. For example, you can compare the affect of expanding the budget for certain products, forcing a minimum number of customers for another product, forcing a minimum ROI or revenue threshold, or 'spend at least $150,000 on offers to undermarketed customers in the Northeast', all while analytically calculating the sensitivity of changing each parameter and the net results for each combination.
     
  4. Optimise the entire range of marketing campaigns simultaneously to determine which set of campaigns can best meet your overall objectives. In the ever changing and complex world of marketing, it is important to understand the big picture one customer at a time. Mathematical optimisation takes into account the analytical models and various scenarios that have been defined, sorts through all the data and provides results showing the best of all possible solutions – ultimately helping marketers make smarter decisions.
You can do all of the above using commercially available software and an analytically driven approach. Consider the telecommunications company that was conducting monthly campaigns for DSL, wireless, cable and telephone offers. The company wanted to maximise their customers’ lifetime value. But they struggled to know which combination of campaigns to employ. Budget constraints limited the number of campaigns per product. The company also wanted to include new products that weren’t selling enough to show positive ROI, but they wanted to make sure that campaigns for these products weren’t left out. To resolve their issues, the company turned to an optimisation solution. The results: they increased their profit stream by $6 million in the first month.

Larry Mosiman has over 20 years of experience leading marketing teams for high tech companies.  He is currently the world-wide product marketing manager for SAS’ Customer Intelligence Solutions. 

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