Allocating a client’s budget is a difficult task. It is necessary to decide exactly how to spend the budget, divide between platforms and tools, and then clearly explain to the client why the funds need to be allocated in this way.
Lara Lowery, account manager for US agency Hanapin Marketing, uses the 70/20/10 principle to simplify the budget allocation process. She described this method on PPC Hero, and we translated her column and asked our Russian colleagues how they divide the budget between advertising systems and formats.
The 70/20/10 principle
Do not take this formula as an axiom, in some cases it may not work. This is just a recommendation.
About 70% of the total budget needs to be invested in tools and techniques that you have been successfully using for a long time, the so-called “evergreen campaigns”. These are the proven strategies that generate the most conversions. The author does not recommend reducing the share of the budget for this segment, otherwise the efficiency may decrease. When most of the funds are spent on proven methods, the client is confident that the promotion will work anyway, and therefore will be more flexible towards you when you discuss other ideas on what to spend the budget on.
Even if you and the client know the structure of your Evergreen Campaigns, take the time to explain what these campaigns and tactics are and identify the main KPIs. It is important to demonstrate to the client the result that each dollar spent has brought.
Invest about 20% of your budget in hypotheses that are likely to work. Usually these are techniques aimed at expanding the bottom of the funnel. For example, this can be scaling search and social media campaigns, testing new types of ads, launching YouTube ads for existing campaigns. By the way, depending on the topic, investments in YouTube may not be 20%, but 10%. All of these options not only bring conversions, but also allow you to reach a new level, master new sites.
As with most budgets, provide the client with details on the campaign structure and the techniques you plan to use. Explain what it takes for you and the client to get positive results, and be sure to mark the deadline. This will show the client that you have thought through the solution carefully and are taking it seriously.
Finally, spend 10% of your budget on brand new ideas. This part of the money should be invested in testing hypotheses that may or may not work. For example, going to Pinterest or Twitter, display ads, brand awareness research, or a YouTube campaign (as noted above, depending on the type of customer). The specialist understands that there are practically no expectations from these investments, but the client is unlikely to like such an explanation. Therefore, it is necessary to describe in detail how you will measure the effectiveness of testing, in which case the experiment will be considered successful, etc. The clearer you explain this, the more likely the client will not be frightened and agree on a budget for testing.
When drawing up a budget allocation plan, it is important not only to determine what to spend money on. It is necessary to outline the tactics of promotion, expectations from it and ways to measure effectiveness. So you can convince the client that he can trust you and achieve positive results from the promotion.
How experts recommend budget allocation
We asked specialists from different agencies what recommendations on budget allocation they can give and what strategies they use in working with their clients.
The advertising budget is formed based on the current demand and the client’s capabilities. We distribute money through advertising channels depending on the goals of the client, the specifics of the business and the volume of the budget that the client is ready to allocate for advertising, the current seasonality and the importance of goods by groups in the client’s product portfolio are also taken into account. There is a landscaping client. To start advertising, we suggest that the client allocate 60% for contextual advertising (50% for Yandex.Direct and Google Ads) and 40% for targeted advertising (50% for Facebook / Instagram and VKontakte). In the context, we allocate 70% for search, evenly distributing everything among advertising companies with general queries, dynamic and by type of flowers (roses, peonies, tulips, etc.).
If the budget is very limited, then, as a rule, we use only contextual advertising with basic tools (search advertising, YAN, KMS, retargeting). For example, there is a client from a region that produces greenhouses, mesh-netting and professional sheet, the budget is limited, and we clearly understand that with the available range of advertising budget only for one system. We select only Yandex.Direct. We allocate most of the budget – 85% – for search (60% of them for greenhouses, since the peak of seasonal demand is now) and 7.5% each for YAN and retargeting.
If the goal is brand development, then the budget priority is shifted towards display advertising, video and YAN / CCM.
The distribution between campaigns is based on the specifics of the business and the client’s goals. Usually, the largest share is given to advertising campaigns in search, but there are, of course, other cases – for example, when advertising events or new products, the demand for which has not yet been formed.
We calculate everything so that the budget is enough for the whole day and there are no stops of advertising campaigns. In the process of optimizing advertising campaigns, we must redistribute the advertising budget depending on the efficiency of the channels (their profitability) – we turn off ineffective channels or cut the budgets in them. In any case, we make the initial distribution based on hypotheses, and after spinning test budgets, we are already making adjustments and redistributions, selecting the most effective advertising cocktail for the client.
Before we start testing and suggesting a new tool, we try to test it on our projects and our own advertising. We will practice on ourselves, understand how to work with it, and then we will offer to clients.
We use three approaches for experiments:
If a client is our favorite and we have been working with him for a long time, we ourselves allocate an amount from the monthly budget for experiments and conduct them. At the end of the text period, we look at the results and show them to the client. If everything is fine, then we launch the new tool into active work.
If a client is also our favorite, but with a limited budget, then we usually act like this: we show the results of working with new tools on projects of our other clients or using the example of open cases, we try to do this convincingly and offer only if the tool can really give a visible result to the client. If the client agrees, we take and test.
If the client is again our favorite (yes, we don’t have others), but very conservative, we just involve him with mailings, articles and wait until he wants to. Or when all its competitors will already use it.
Love your customers and test new tools.
In the distribution of the advertising budget, we adhere to the principle of expediency. In other words, at the head of budget planning is the goal that must be achieved through advertising placement. Further, it is decomposed to the level of key performance parameters, which in turn become a criterion for the selection of channels and the volume of their use.
There is no universal rule here. The split of conservative and promising instruments largely depends on the psychotype of the client and the level of ambition of the goals set for us. For example, innovative customers are more likely to receive test bids than others because those bids have the prospect of converting to further placements.
Speaking of goals, if we are confidently achieving targets with conservative tools that appeal to hot demand, and there is no great need to scale the campaign, then test placements are less likely to be used.
If you try to deduce the average temperature in the hospital, then about 5-8% of the total volume of placements is allocated for testing new formats.
And in agreeing on an additional budget, there is only one really working argument – this is a picture of cause-and-effect relationships that the client understands, within which we simulate the impact of a new tool on key performance indicators. In other words, it is necessary to demonstrate with the help of clear and transparent modeling algorithms how and how much the efficiency of the media mix will increase after the implementation of this tool.
Building a strategy for working with any project is based on the goals that are set for us. One of the starting elements of the work is planning and allocating the client’s budget.
In solving this problem, we are guided by a kind of pyramid, on the steps of which are possible clusters of keywords and tools. Moreover, each stage has its own level of conversion and efficiency, as well as its own capacity. Thus, the top of the pyramid, its narrowest part, represents the most converting tool or group of keywords, usually with the lowest audience volume. Each step subsequently represents a separate advertising campaign.
Often, a customer’s advertising journey begins with a minimum test budget. In this case, the priority is to maximize efficiency: we gradually descend from the top of the pyramid, stopping at the stage where we are approaching the limit of the allocated budget, while reaching the hottest audience.
If the task is to urgently scaling the turnover / volume of leads and the set KPIs allow you to launch all possible advertising campaigns at the first stage to maximize audience coverage, then the whole pyramid is “launched” at once, and then, according to the results, advertising campaigns are optimized and the budget is redistributed to the most effective tools.
The next step in the development of the project is carrying out experiments, connecting new products or the next steps of the pyramid (for example, in the first described example or an intermediate situation). This does not always require additional budget, often testing is carried out as part of an existing campaign. As a rule, it is recommended to set aside an amount sufficient to receive at least 10-15 orders / leads at an average cost.
If the budget is not enough, it is important for the client to provide the following information for approval:
- a description of the new campaign and its features, what exactly you want to test;
- analytical comments on why you think the campaign will work;
- preliminary timing and forecast of the result.
Upon completion of testing, it is necessary to provide a full report with a description of the work performed and a plan-factor analysis.
The 70/20/10 formula is just an approximate simplified budget allocation scheme. It is not universal, but it can help at the initial planning stage. Based on this formula, a specialist will be able to draw up a more detailed budget allocation scheme for a specific client. Here’s what, according to experts from the agencies, you need to consider:
- Promotion goals.
- Client type.
- Previous customer experience, if any.
- The amount of budget that the client is ready to allocate for advertising
- The importance of product categories in the customer’s product portfolio.
Each client is individual and it is necessary to distribute the budget taking into account his characteristics and wishes. Spend time on a personal scheme for each client, explain in detail what the money will go to and what results you can expect.