A New Approach to Managing Risk and Boosting Ad Spend ROI
Sales and Operations Planning

A New Approach to Managing Risk and Boosting Ad Spend ROI

August 7, 2023

As a CPG, ad budget is the lifeline of your business, but like most marketing leaders, you are left in the dark when it comes to accurately understanding ROAS and COA. Your goal is to be agile with how you’re allocating budget, leaning into tactics that are working and proactively seeking better approaches when a plan isn’t providing the return they expected. However, most of the teams we work with are dealing with data pipelines that are so scrambled, it’s difficult to even perform a one-off analysis of ROAS by tactic, much less keep an ongoing tally of how different partners are performing, which tactics to put more dollars into, and where they’re wasting their money.

The Attribution Problem

Most marketing teams rely on Adobe or Google Analytics to attribute sales to a specific tactic, but that approach starts to seem a lot less useful when you consider the wildly different numbers these different attribution models produce. For example, let’s say you saw a significant sales lift that coincided with a Facebook ad campaign, but only half of their sales bump was actually attributed using a standard Multi Touch Attribution approach, likely due to awareness from the Facebook ad not being considered in that model. Or perhaps you’ve experienced the pains of this MTA gap after allocating budget to Google ads, saw high attribution results, but didn’t see an increase in sales overall.

At Well Principled, we have seen that our customers need consistency in attribution and a clear connection between revenue growth and ad spend in order to start making more informed choices about those crucial marketing dollars. With both MTA and Media Mix Modeling (MMM), our users find it difficult to pull apart line item spend to create clusters of value delivery for improved decision making overall.

Many of the teams we work with had been paying consultants for Media Mix Modeling on an annual basis. This technique allows them to make connections between a specific media type and tactic and the sales result, but the inflexibility of the annual process means they can’t flex and play with it throughout the year.

The above graphic shows how Nucleus relates advertising dollars spent to the marginal return in sales, which is combined with Customer Lifetime Value (CLV) to determine the profit maximizing approach.

Managing Risk Throughout the Budget Cycle

While it’s generally accepted that scenario planning is crucial to success with a marketing plan and spend should be spread across higher and lower risk tactics, that approach makes it more difficult to stay agile and respond to how the consumer is ultimately interacting with the brand. Most importantly, what appears to be a risk-balanced approach could actually result in excess wasted dollars.

Using Nucleus’s powerful demand forecasting model, Well Principled can simulate all potential outcomes of varied marketing spend scenarios and provide an optimal plan for the year. Rather than attempt to model individual relationships between exposure and outcomes, the WP Acquire application models the holistic effect of all sales drivers like price, geography, etc. With this data, marketers can truly understand the changing effectiveness of spend and make a profit-maximizing choice.