Reporting 5 Min Read

Smart Campaign Budgeting Means Better Performance

Written by Tim Edmundson

The law of diminishing returns is a pesky one. If you’re not familiar, it refers to a point at which the level of profits or benefits gained is less than the amount of money or energy invested. In simpler terms, there comes a point when whatever you’re doing is just not worth the trouble. Diminishing returns affect pretty much everything — including campaign budgets. Marketers obviously want to spend their budgets wisely, and spending more for the same results isn’t anyone’s idea of a good time.

So what can marketers do to avoid the cruel effects of diminishing returns when it comes to their campaigns? Smart budget forecasting. By understanding your campaigns’ previous performance, you can better anticipate the good your spend will do, and set appropriate budget and goals. What results is an intelligent, data-driven approach to marketing that drives strong performance. And good news, we have a great way of doing just that.


Smart Forecasting with Good Data

When it comes to determining what you should spend on your campaigns, past results can actually be a decent indicator of future performance. Thousands of brands have run campaigns with us, and with these campaigns comes a lot of data. Mind boggling amounts, really.

We’ve put this data to work by analyzing brands’ past performance and finding key metrics which we use to discover the optimal amount they should spend to maximize return. This number, in many cases, can be greater than what they’re currently spending. By analyzing campaign data, we’re able to identify the budget sweet spot and ensure brands don’t leave money on the table.

Here’s how we approach it:

> We start by analyzing a brand’s historical data. Monthly spend, conversions, revenue, and other data points are taken into account.
> The information is then plotted on a graph, and a trend line is identified. The trend line tells us predictable results based on the above factors.
> This allows us to identify the optimal budget for their campaign.
> And because we use logarithmic regression analysis to identify optimal budget, we can forecast what a higher spend will yield, thus identifying the sweet spot between budget and performance, and avoiding the law of diminishing returns.

Importantly, our analysis also lets us identify the potential ROAS generated by a campaign. By taking the number of conversions historically recorded (as determined by a campaign’s spend) and multiplying by the average order value, we can predict the revenue generated by the campaign. This is valuable for not only setting expectations, but also tying the right ROAS goal to your campaign’s budget.


Smart Spending with the Right Budget and Goal

Identifying the budget that will give the best performance for the price is key because you don’t want to overspend when it comes to your marketing. But take note — this analysis carries more weight than just managing expectations.

As marketing evolves and machine learning becomes more prominent in the advertising industry, it’s important to know the right amount to spend to hit your goals. That’s because data-fueled ad engines, like our Dynamic Spend Optimization, take these factors into account when optimizing campaigns.

Dynamic Spend Optimization, or DSO, uses billions of data points to decide when and where to spend your budget in order to hit your campaign goals. Part of the magic of what DSO does is that it’s all automated — to get started, all you need to do is enter a budget and goal. Once it’s armed with these two data points, it optimizes your campaign to balance your spend and performance. Which is why our predictive analysis is key to strong campaign results. Knowing your optimal budget and goal ensures your campaign’s optimizations are carried out the right way.

This speaks to the importance of an intelligent approach to marketing. It’s one thing for a marketer to say, “Well traditionally we’ve managed to hit X goal by spending Y amount.” It’s another to take that information and reliably predict the actual amount of spend needed to maximize performance. Marketers shouldn’t have to rely on guessing and gut instinct to drive their performance. A scientific, measured, and proven approach is best. There will always be a place for gut instinct in this world, but campaign management isn’t one of them any longer.


There’s a Right Budget and Goal for Every Brand

It can be a scary prospect when setting a budget and goal. Spending thousands of dollars (or more) of your company’s money can be a bit unsettling if you don’t get the results you hoped for.

Thankfully, as marketing tools like DSO evolve, marketers are better equipped to spend money wisely. Strong performance is possible through an educated, intelligent approach, and the ability to forecast the proper budget and goal is the starting point for any successful campaign. So stop relying on gut instinct, or even the results of a single campaign, and start approaching your advertising the right way.

Interested in seeing how SteelHouse can help you find your best budget and goal? Let’s talk.