Everyone seems to be aware that investing in paid media is worth it, but few know how to delimitate the amount to use where. This is where the specialists come in. An effective paid media budget is the crucial element that will ensure your strategy is correct and will yield the best results.
The following guide will hopefully shine some light on the ins and outs of efficient spending.
Determine your strategic paid media budget vs your goals
The only way to be strategic with your budget is to allocate it effectively. Allocating resources will ultimately help track performance better. Having the flexibility to experiment with platforms and different ad formats can only be allowed by successful budget potting.
Do only big budgets yield successful results, then? No, effective allocation isn’t about the size, but the strategy behind it!
So what are the intended goals?
Different objectives are in need of clear allocations, and defining what success looks like for you is pivotal. Whether it’s brand awareness, lead generation, or conversions, the goals will make the choice for you.
For example:
- Brand awareness: Numbers matter. For this goal, Social Media is key as it allows for high reach. This top-of-the-funnel activity will aim to introduce the brand to new audiences by yielding elevated levels of engagement and reach. Metrics to look for include: impressions, cost per thousand impressions (CPM), and video completion rate.
- Lead generation: Google Ads can be in focus as it allows targeted advertising. This mid-funnel activity is crucial in nurturing interest and driving engagement. Metrics to look for include: CTR, CPC, and time on site.
- Conversions: Retargeting campaigns are your bread and butter; by recapturing those who have shown interest, qualitative direct sales can be achieved. This bottom-of-funnel activity includes branded search and shopping ads and relies on metrics such as revenue, return on ad spend (ROAS), and cost per acquisition (CPA).
Another important aid would be Historical Data, by utilising it we can work backwards and define our budgeting decisions. Key data such as CTR, conversion rates, and cost per acquisition could give you all the information needed to make an informed decision. Here, you can understand the role each channel played, what worked, what could’ve worked if more budget was available, and most importantly, how to build a forward-looking budget that will surpass the previous results.
But what about seasonality, you ask?
Across all industries and all businesses, a certain degree of seasonality does exist. For example, in retail, there can often be seen increased traffic during holidays (Thanksgiving, Christmas, Mother’s Day, Father’s Day etc), which ultimately do impact advertising’s effectiveness as competition is higher and budget defines success. Having a tight budget during this period can prevent advertisers from purchasing relevant space.
However, this can easily be entertained or combated by adjusting the budget correctly: ramping it up during peak season and scaling it back during slower periods. The key here is to map out seasonal patterns and include them in the media planning process. For example:
Low season: Make the most of it by testing creatives, running experiments, and utilizing prospecting campaigns. During this time, CPCs are more likely to be affordable, which will make your run time longer.
Product launches: Supporting product launches is crucial, ensuring you can dedicate creatives, a trackable landing page, and enough budget to temporarily assist the awareness activity.
Peak seasons: The highest-converting periods will demand significant budget allocation to those hardworking conversion channels that are working overtime to capture demand.
The 70-20-10 rule
The old and trusted 70-20-10 rule is a pillar of marketing frameworks that remains reliable through time. So how does this split work?
70% to proven channels: This is the core channel mix that is utilised because of its proven, tried and true performance. Those channels that consistently deliver ROI, where forecasting results are easier, and where you, as the advertiser, can confidently explain their efficiency. Examples would include Branded Search or general Brand campaigns, as well as retargeting on Meta or LinkedIn.
20% to emerging opportunities: The real push starts here for channels that require some testing before committing to higher scaled budgets. Products such as Performance Max usually sit under this category, as a pilot programme is required to figure out tactics.
10% to experiments: There’s no high reward without high risk, therefore, this 10% is for the wild card channels where you can experiment with ad formats or trial a new platform. Uncharted territories for clients could include Snapchat, Reddit, or Programmatic.
This framework basically recommends a diversified approach that focuses on short-term wins without compromising long-term growth. The perfect balance between not creating dependency on either Paid Search or Paid Social, as well as not spreading the budget too thinly and not producing meaningful results.
New vs established advertisers have different approaches
When planning media spend for a first-time advertiser versus an established brand, there are several factors to consider:
Brand awareness: For advertisers dabbling in paid media for the first time, brand awareness will be more costly than for established brands. However, it’s worth the cost, as this top-of-the-funnel activity is crucial in identifying the target audience.
Conversion rates: Because of their established customer base, seasoned brands have higher conversion rates, which first-time advertisers will need to nurture through longer conversion-focused campaigns.
ROI: For first-time advertisers, the return on investment might fluctuate more often in an unpredictable way until it stabilises.
