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Ajjan Associates, LLC

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How can effective Budget Allocation increase Advertising ROI?

No doubt, it is risky to alter the current allocation of advertising resources without knowing the outcome, and every marketing manager knows how difficult it is to justify a higher Sales & Marketing or Advertising budget.

Our decision calculus modeling techniques enable complex estimations of expected revenues & profits at a given spending level, so that you can set your Marketing or Advertising spend to maximize profits.

This is accomplished through a software-driven calculus-based analysis of established projections, evaluating both increased and decreased budget scenarios for advertising expenditure.

Often, revenues or profits can be significantly boosted with a simple reallocation of existing budgets.

Eligibility for ROI Tracking

Eligibility for the decision calculus model requires multiple channels of marketing, and the ability to track revenues by each channel.  What does that mean?

Well, you could have 3 different sales reps, each with their own marketing budget.  You could be an internet business, advertising online in various places, and can track your site hits by point of origin.  You could be a phone-driven business that advertises 3 different numbers in 3 different places.

Litmus Tests for Decision Calculus

1. Which channel has the best ROI?

Our Decision Calculus techniques use a complex algorithm to compare all of your advertising & marketing channels simultaneously, determining the best bang-for-your-buck of your current allocation.

2. Can I justify a budget increase?

With the quantitative analysis of an optimized budget scenario provided by our Decision Calculus model, you'll have hard data to justify an increased advertising budget.

Sample Advertising ROI Analysis

Above:  graphical analysis from a sample Decision Calculus project.  Read more to learn how you can employ this powerful method.

more services from Ajjan Associates:

Conjoint Analysis - Risk Analysis - Resource Allocation

Retail storefronts often have difficulty in utilizing decision calculus, because of the difficulty of knowing exactly what brings customers to the store.  For example, billboards are not traceable.  But there are instances of compatibility, using coupons or other traceable marketing tools.

Method of Tracking Advertising ROI

Let's say you have a mail order business, and you advertise in 3 different magazines with a different phone number in each, plus you have banner ads online.  That's 4 channels, all traceable.

The first thing we will ask you to do is make estimates of revenue given 5 key points of Sales & Marketing or Advertising spend, for each channel separately:

• zero (what residual business would you have from that channel if you stopped advertising?)

• cut spending in half (how much impact would a 50% reduction have on revenues?)

• current spending level (a known quantity of revenue from your current allocation)

• double spending (project the impact on revenues of a 100% increase in spending)

• maximize spending (with infinite dollars to spend, where would your revenues top-off?)

Do this for each channel and we will derive the following:

By estimating the shape of the curve (the mathematical function that relates revenues to Sales & Marketing or Advertising spend at any point), we can probably pick out the optimal point quite easily.

That is not the complicated part.  But try to factor in all 4 channels at once and find the optimal point!

Advertising ROI Results

Now the software comes in.  It will take the projections, and compare all 4 functions simultaneously, ultimately coming up with a recommended optimal spending level for each channel, given the same marketing or advertising budget, like so:

As you can see, the results are often dramatic - a 30% increase in revenues with a flat advertising budget (the spending stays at 40, while the revenues go up from 131 to 170).  Once the model is designed, you can easily configure it for an increased marketing budget, or a decreased one.  The possibilities are numerous.

Please fill out the form to the right to learn more about the design and implementation of this powerful technique.

We would be more than happy to schedule an initial consultation free of charge to understand how our decision calculus tools can help you better allocate your Marketing or Advertising budget, either by phone or in person.

Examples

Hospitality Industry - We showed a mid-sized hotel chain with a marketing budget of $14M how they could double their profits by advertising in different channels and focusing their efforts more narrowly, without increasing the advertising budget.

Pharmaceutical Industry - Given the high cost of sales reps, companies must carefully determine which products need to be marketing most heavily, and which will generate sales on their own.  Our tools  show a company how many reps to dedicate to each product, in order to maximize impact.

PO Box 4031 - Clifton, NJ  07012  USA

george@ajjan.com - +1 (973) 685-6368

Conjoint Analysis - Risk Analysis - Decision Calculus - Resource Allocation