The Equation that Could Transform Your Digital Marketing Strategy

In today’s digital ad space, marketers frequently find themselves diving deep into channel analytics, often neglecting the overarching view. You pull up your data, note that 75% of sales are thanks to Facebook lead generation, and, naturally, allocate the majority of your budget there. Simple, linear, and seemingly effective. But are we potentially sidelining an important aspect?

Consider a different scenario: What if a sizeable chunk of your sales traces back to a particular demographic, like the 40–50 year-olds nestled in suburban areas? Beyond just optimizing channels, you’ve now uncovered a richer dimension — segment-centric optimization.

Enter the realm of Dual-Dimension Budgeting (DDB).

It’s a simple, two-pronged strategy:

1. Funnelling resources towards channels that perform best.
2. Sharpening that allocation with an emphasis on the most rewarding audience segments.

This isn’t about dethroning channel-based budgeting but amplifying its prowess. It’s about pairing channel insights with the goldmine that demographic data.

Now, it might seem like a tough overhaul. But combining channel strategies with audience insights could lead to untapped opportunities. Think of it as having a panoramic view of the forest, while also appreciating the unique charm of each tree.

As marketers in a dynamic landscape, complacency is our Achilles’ heel. We must persistently probe: “Is there a superior strategy possible?” At times, a mere recalibration can usher in transformative outcomes.

Crafting a marketing strategy that resonates requires precision, insight, and a decent grasp of numbers. As we consider a dual-faceted approach to budgeting, it’s essential to delve into the underlying mathematics that powers it (trust me it’s not that deep a dive). Here’s a breakdown:

The Basics

Imagine you have a marketing budget of $100, and you’re looking to allocate it efficiently across various channels and demographics to achieve the best possible ROI.

Let’s use:

• Ci​: This represents the revenue share contributed by the ith channel. In essence, it’s a fraction that tells us how much of our overall revenue comes from that specific channel.
• Dj​: This indicates the revenue share from the jth demographic. It’s a similar fraction, but this time showing us the revenue contribution from a particular age group, geographical location, or any other demographic parameter.

Both of these fractions, Ci​ and Dj​, will lie between 0 and 1. For instance, if YouTube (as a channel) contributes to 30% of your revenue, its C value would be 0.3. Similarly, if suburban 40–50 year-olds account for 40% of your revenue, its D value would be 0.4.

Crafting the Allocation

The allocation formula is: Aij​=Ci​×Dj​×100

Here, Aij​ stands for the amount from your $100 budget that should be allocated to target the jth demographic via the ith channel.

A Practical Example

Let’s take the above mentioned example to make this clearer:

Suppose:

• YouTube (C1​) contributes to 30% of your revenue, so C1​=0.3.
• The suburban 40–50 year-olds demographic (D2​) brings in 40% of your revenue, making D2​=0.4.

Using our formula, the budget allocation for targeting 40–50 year-olds on YouTube would be: A12 = 0.3 × 0.4 × 100 = 12$

This means $12 of your total $100 should be strategically funneled into YouTube ads targeting suburbanites between 40–50 years of age.

To illustrate the approach using 5 channels and 5 demographics (needless to say, you could use this system to allocate budget across an unlimited number of demographics and channels, when required), let’s assign random contributions for each channel and demographic.

Channels — C:

1. Google Search (C1): 0.25 (25%)
2. Facebook Lead Generation (C2): 0.2 (20%)
3. YouTube (C3): 0.3 (30%)
4. Instagram Shopping ads (C4): 0.15 (15%)
5. Twitter (C5): 0.1 (10%)

Demographics — D:

1. D1: 0.3 (30%)
2. D2 (40–50 year-olds living in suburban areas): 0.4 (40%)
3. D3: 0.1 (10%)
4. D4: 0.1 (10%)
5. D5: 0.1 (10%)

Here are 5 major channels and 5 key demographics with their suggested budget allocation:

From this table, we discern that Google Search targeting demographic D2 should be allocated 10% of the budget, translating to $10. Similarly, a combination of YouTube and D2 should receive 12% or $12.

In Summary

This mathematical approach ensures you’re not just spreading your budget thin across all channels and demographics but are directing funds where they have the maximum potential impact. As markets evolve and customer behaviors shift, it’s crucial to keep revisiting these numbers and tweak your strategy. Being agile and informed is the key to staying ahead. Moreover, while this formula is potent in the digital realm, its principles could even prove effective in offline marketing strategies.

Subscribe to DDIntel here.

Submit your work to DDIntel here.

Join our creator ecosystem here.

DDIntel captures the more notable pieces from our main site and our popular DDI Medium publication. Check us out for more insightful work from our community.

DDI Official Telegram Channel: https://t.me/+tafUp6ecEys4YjQ1

Follow us on LinkedIn, Twitter, YouTube, and Facebook.