Imagine you’re a marketing professional. You work for a large Australian company, planning its campaigns, allocating its budget and building its marketing strategy. You’ve just come back from Christmas break, put your bag down on your chair, and slipped into the kitchen to make yourself a quick coffee before delving into your overflowing inbox.
The CMO walks into the room and taps you on the shoulder. You exchange niceties, ‘How was your holiday’ this, ‘Did you go back home’ that, and then they jump straight into it:
“We’ve just secured our budget for the first half of the year. Can you please have the budget splits to me by the end of today?”
Budget splits, what does that mean again? Your head starts swimming. Two days ago, you were lying on the beach trying to figure out if you should have sushi or a burger for lunch. Now, you’re deciding how to spend millions of dollars.
Ahh yes! You remember, budget splits. What percentage of our budget should be going towards long-term brand building versus short-term activation to drive sales?
You nod, replying with something along the lines of, “Absolutely”. You then quickly rush back to your computer, trying to remember how the heck you come up with a budget split.
Here, you have two main options. First, you can pull up your past budget splits, using them as a benchmark to decide what to do going forward. Maybe your brand health metrics have suffered in the last year, so you push a little more money into brand, or perhaps sales have slumped a bit, so you do the opposite. Second, you can Google it. Look for articles, surf Google Scholar, or even refer to marketing textbooks. What does the literature say I should do?
But, neither of these options are particularly accurate, and both possess some critical flaws.
Simply repeating what you’ve done in the past is never a good strategy. Not only might you be repeating mistakes, but you also won’t have any reliable way of testing to see if you are. If your budget split has been the same for 5 or even 2 years, how will you know what anything different could yield?
And looking to the literature doesn’t tell you a great deal about your company. Just because Binet & Field found that on average a 60/40 budget split is the optimal split, it doesn’t mean the same ratio will be right for your customers.
Before committing to a number, you need to be able to answer a series of questions. Questions like, how healthy is our brand? What sort of industry are we in? What is the competitive landscape? These are all factors that impact the way budget should be allocated.
What we’ve described in this fairly unrealistic example is a key issue marketers face. That is, finding methods to accurately and effectively allocate their marketing budget that don’t rely heavily on non-scientific methods: methods that cannot be directly tested to see if they actually work.
The Spark Foundry Analytics team has been hard at work for the past year tackling this problem, and we’ve found the answer right under our noses. That is, most companies are sitting on a wealth of customer data that can be leveraged to answer problems exactly like this one.
Enter the Golden Triangle.
The idea behind the Golden Triangle is very simple: draw on a company’s data for insights on the relationship between their brand’s perception in market and their business performance. Then, use that data to build a statistical model that gives quick and accurate forecasts of business outcomes based on various spending scenarios.
It isn’t the whole answer to the problem. There are obviously broader considerations regarding culture, category and consumer to keep in mind, but it’s a very large, very powerful arrow in the quiver. It allows our clients to not only automate part of the budget allocation process, but to base their overall strategy on their own data, customers and trends, making the process much more scientific.
So how does it work exactly?
The model looks at three metrics, like points on a triangle (hence Golden Triangle), to ultimately determine the optimal spend split. The three metrics are media spend, brand health and business conversions. Media. Brand. Business. Think of it like beads on an abacus. If you slide all the beads to one side, say into brand, the other metrics will dip. You can’t spend all your money promoting a single product, or your brand may suffer, nor can you spend your entire budget building your brand as that may lead to dips in short term sales.
Thankfully, our Golden Triangle model is trained to determine what would happen if you focused too much on one point of the triangle by basing its predictions on the other points of the triangle via intricate statistical modelling. It’s a balancing act, and one that shifts constantly. But, because the model is built atop the data that dictates this balance, it’s a scientific reflection of how your customers respond.
Using our model, marketing professionals, media planners and business strategists alike can test different scenarios, deciding how much to spend on marketing based on the status of the business and its brand, and how to then best split that budget into brand and product advertising.
The tool doesn’t simply give you the answer, it instead invites questions and offers data-driven outcomes. With it, you can effectively “war game” your way through budget allocation, pushing budget into different areas like battleships on a table and analysing the tactical response.
We’ve recently deployed the model with several clients and seen great success. It’s taken much of the guesswork out of allocating large sums of capital, helping to optimise marketing spend and informing strategy to hit brand and business KPIs as well as providing a robust measurement framework.
In a time when we have access to more data than ever before, it only makes sense that our investment decisions should be rooted in just that: data. Whether you’re managing $100K or $10 Million, our solution ultimately provides the rigour to substantiate those decisions in ways that resonate with agencies and marketing teams, as well as right up to the C-Suite.
The Spark Foundry Analytics team is an award-winning national team of 20 specialists who design and build proprietary solutions to solve not just our clients’ marketing challenges but significant business problems. If you would be interested in an initial consultation, please contact us via our team email address: email@example.com
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