With advertising methods becoming more diverse, how can you optimize your budget?

In recent years, advertising methods have become increasingly diverse. In addition to commercials on TV, radio, and other mass media, new advertising methods are constantly emerging in the digital space, including listing ads, native ads, and DSPs. The focus in this area is on optimizing advertising budgets, determining how much budget should be allocated to each ad in order to maximize results.

In this article, we will introduce the challenges of optimizing advertising budgets and points to keep in mind.

What is ad budget optimization?

Ad budget optimization is the process of allocating the optimal budget to each ad in order to maximize advertising results.

The background to the attention being paid to advertising budget optimization is the diversification of media and changes in advertising organizational structures. Traditionally, advertising was centered on commercials in mass media such as television and radio. As a result, advertising budget allocation was left to the experience of the person in charge or the advertising agency. However, as advertising methods have diversified due to the emergence of digital media, advertising budget allocation has become more complicated and experience-based rules are no longer applicable. The digital marketing environment is changing dramatically, with an increasing number of companies completing the process in-house without using advertising agencies.

Another factor is the significant change in companies' attitudes toward measuring advertising effectiveness. Traditionally, advertising effectiveness was measured primarily in terms of awareness rate and brand image. However, the recession following the Lehman Shock caused companies to become more critical of their marketing investments. As a result,How much did the initiative contribute to sales?As a result, people have started to place more importance on whether their ads are generating revenue, and they are now paying more attention to optimizing their advertising budgets to maximize sales.

A typical method for optimizing advertising budget: MMM

Traditionally, advertising budget optimization was dominated by media optimization. For example,Optimizing TV commercial placementsHowever, with the advent of digital advertising, which makes it easier to measure the effectiveness of ads, and the ability to obtain a variety of data due to changes in technology, a method for optimizing advertising budgets has been gaining attention.MMM (Marketing Mix Modeling).

MMM is a method of modeling the relationship between sales and marketing measures by statistically analyzing sales records and advertising volume. By modeling not only the company's sales records and TV/Internet advertising data, but also external factors such as weather and competitor advertising status, it is possible to estimate the sales contribution of marketing measures andUnderstand your ROIYes, you can. This allows you to simulate how sales will change if you change the budget allocation, so it is attracting attention as a representative method for optimizing advertising budgets.

An important point in MMM is updating the model. It is common that the accuracy of the initial model is not that high. Therefore, by updating the model, such as by changing the granularity of the data used in the analysis, the analysis will become more valuable.

Individual Touchpoint-Based Analysis: MTA

With the diversification of media, attention is being paid not only to the direct sales contribution of marketing measures, but also to their indirect contribution. For example, the sales contribution of each advertisement can be verified by comparing the final purchase amount of a user who saw a TV commercial and then purchased at a store via a banner advertisement with that of a user who purchased the product simply by looking at it in the store. The method used for this is MTA (multi-touch attribution). While MMM models correlation over time, MTA analyzes and models based on individual touch points. It utilizes data such as direct mail delivery history and email newsletter subscription history.

The rise of digital media is the reason why MTA is attracting attention. Until now, the only way to investigate touchpoints was through attitude surveys. However, with the evolution of technology, it is now possible to obtain various behavioral data, so it is possible to grasp in detail which advertisements people saw and then visited a site. In addition, by utilizing MTA, it is also possible to consider personalized recommendations and promotions.

Both MMM and MTA are methods that allow you to consider optimizing your advertising budget by calculating the sales contribution of your measures. Neither is better than the other. It is important to combine both, such as optimizing your advertising budget with MTA in the short term, and then analyzing with MMM after a certain period of data has been accumulated.

Three important points for optimizing your advertising budget

Finally, here are three important points to consider when optimizing your advertising budget.

First of all, MMM and MTA are simply analytical methods, and it is important to make decisions and use them based on them.

Both MMM and MTA are methods for visualizing results by analyzing past data. However, the situation is constantly changing. Unpredictable social changes, such as the COVID-19 outbreak, may occur. Therefore, it is important not to simply analyze, but to make comprehensive judgments based on the results and the situation.

The second point is to always remember to challenge yourself.

The media environment surrounding advertising is constantly changing. As with the rise of Facebook, Instagram, and TikTok, it is difficult to predict what kind of media will be born and when they will become popular in the future. Both MMM and MTA are analysis methods based on past performance. If you continue to think that this measure increased sales in the past and continue as it is, you will be left behind by the changing times. The lead time for measuring effectiveness is also shortening, so you can try it out with a small budget and measure the effectiveness of your advertising. One idea is to always set a part of your budget as a challenge budget.

The third point is to always implement the PDCA cycle.

With MMM and MTA, the accuracy of your results can vary greatly depending on the type of data you use. When optimizing your advertising budget, always remember to keep the PDCA cycle in mind.

Summary

Due to the diversification of advertising methods and growing awareness of cost-effectiveness, advertising budget optimization is attracting attention.

Methods for this include MMM and MTA. By calculating the sales contribution of each campaign, you can consider the optimal advertising plan.Comprehensive decision-making process, taking into account changes in the environmentIt is important to continue doing so.

Author information

XICA Co., Ltd. Marketing Team