Budget Reallocation
Optimize the mix.
Why Reallocate
The payoff of an MMM is a better budget. Reallocation moves money from saturated, low-marginal channels to under-funded, high-marginal ones to lift total sales at the same spend.
This lesson shows how to turn response curves into an allocation plan.
The Optimization Goal
Formally, you maximize total incremental sales subject to a budget constraint. The optimum is where each channel's marginal return per dollar is equal.
If one channel's marginal ROI is higher than another's, shifting a dollar toward it increases total sales, so you keep shifting until they balance.
maximize sum( response_i(spend_i) )
subject to sum( spend_i ) = total_budget
optimum: marginal_ROI_1 = marginal_ROI_2 = ...All lessons in this course
- MMM vs Attribution
- Inputs and Variables
- Reading an MMM
- Budget Reallocation