Budget Allocation: Data-Driven Spend Decisions

The question isn't "how much should we spend?" It's "where should the next dollar go?" We've seen companies waste millions by overinvesting in saturated channels while ignoring efficient ones. Optimal budget allocation is the highest-leverage activity in UA—yet most teams do it by gut feel.

The Diminishing Returns Problem

Every channel has a saturation curve. The first $10K on Facebook might return $30K. The next $10K returns $25K. Eventually, you're losing money. Optimal allocation means finding where each channel's marginal return equals your target.

The 70/20/10 Framework

70% - Proven Channels

• Consistently profitable
• Predictable performance
• Known playbooks
• Core of your acquisition

20% - Growth Channels

• Showing promise
• Room to scale
• Still optimizing
• Next month's 70%

10% - Experimental

• New channels/tactics
• Unproven but potential
• Learning budget
• Finding tomorrow's winners

Reallocation Process

Weekly Review

1. Pull performance by channel
2. Calculate marginal efficiency
3. Identify over/under-invested channels
4. Shift budget incrementally (10-20%)
5. Document changes and rationale

Monthly Strategy

1. Evaluate channel portfolio
2. Graduate experimental to growth
3. Kill or reduce declining channels
4. Set next month's allocation

Signals for Reallocation

Increase Budget When

• Marginal ROAS exceeds target
• CPIs declining while scaling
• Consistent performance week-over-week
• Untapped audience potential

Decrease Budget When

• Marginal ROAS below target
• CPIs rising as you scale
• Creative fatigue evident
• Audience saturation signals

Common Allocation Mistakes

• Averaging performance: Marginal beats average for decisions
• Slow reallocation: Markets move fast, so should you
• Ignoring diminishing returns: More isn't always better
• No experimental budget: Short-term safety, long-term risk
• Channel loyalty: Past performance ≠ future potential