How to Structure an Advertising Budget

All you need to know to confidently create and present your next advertising budget.

Originally published

October 30, 2020

Written by

Jacob TallyJacob Tally

Product Marketing & Operations

There’s something about setting a budget that can be oddly comforting. A new budget is full of promise and hope. It fulfills a human need to project certainty upon an uncertain future. But you can also feel anything but “fulfilled” the moment you’re asked to come up with an advertising budget proposal for your manager, CEO or finance team. You wonder what to do and where to start. Sound familiar? Don’t worry, we’ve got you covered.

We’ve broken down the budget creation process for you in four simple steps:

1. Define your goals

Whether it’s becoming the regional market leader in your category or doubling sales to show fast growth to lock in the next round of funding — there are a number of frameworks you can use to help define your goals. Some of the better known processes include the OGSM framework and the Objectives & Key Results framework (OKR’s). What’s most important is that goals are SMART — Specific, Measurable, Achievable, Relevant, and Timebound.

The most common goals you’ll find across marketing teams tend to be around sales and new customers. However, consider using multiple goals to intentionally create tension and prevent short sighted decision making. For example, a sales goal by itself could be achieved with aggressive discounting, but if the company has a profitability goal, that option becomes less attractive. Likewise, a new customer goal could be achieved with first-time customer promotions or aggressive spending, so there may also be a goal targeting a specific first-time customer average-order-value (AOV) or an average customer acquisition cost (CAC) target.


2. Look at your data

If you’ve settled on your goals, it’s time to do some analysis and look at historical data. The more granular the better to start, but at a minimum, you’ll want to pull the following numbers for each of your advertising channels by week:

  • Budgeted spend
  • Actual spend
  • Key metrics (see step 1 above - this could be sales, orders, brand reach/impressions, etc)


Once you have the above data, look for trends and answer the following questions:

  • What were the differences in budget vs actual spend and cost-per metrics across different time periods?
  • Are there any seasonal trends?
  • Are there any spikes or cliffs in spend or key metrics?
  • Were there any key events that occurred worth looking at more closely? This may include internal events like a new product launch or external events, or external events, like an election cycle that drove up advertising costs.
  • Are there any major shifts in the mix of advertising spend?
  • Where was the best performance concentrated? In what channels, campaigns, audiences and time of year? What about the worst performance?

For all of the above yes/no questions, it’s key to understand the what and why behind any “yes” answers.


3. Define your initial budget structure and allocation to each channel

Come up with a budget recommendation and have a clear point of view before you present a proposal for approval. This is where the rubber meets the road. It’s also where “it depends.” The ‘right’ budget structure and allocation will be determined by needs and the particulars of your organization. Here are some helpful tips & guidelines:

  • If you’re still in the stage of trying to ‘sell’ an advertising budget internally and need approval, consider presenting two separate scenarios or proposals — one for a more baseline or conservative approach, and another that’s more ambitious; you won’t get what you don’t ask for.
  • For B2C and DTC brands, the lion’s share of your spend should probably be allocated to Facebook and Google. These are your bread and butter “must-haves.” Facebook is great for generating awareness of your brand, while Google can be more helpful at monetizing that awareness of your brand (in the case of branded search) or finding high intent potential customers in your space (for non-branded search).
  • Try maxing out your efficiency on Facebook and Google before adding additional social channels or display channels. Note: if you have a really niche product or target customer, you may be the exception that otherwise proves this rule.
  • If your brand has a broad product catalog and good selection, consider allocating budget towards Google shopping ads if you’re not already.
  • Resist the urge to benchmark or comp against competitor’s budgets. You don’t have the full picture on their business or finances, and you don’t know their motivations. Just because they’re doing X, Y or Z doesn’t mean that what they’re doing is working or makes sense financially. You do you, and stick to what you know.
  • Apply insights from the data in step 2. Should you have invested more in that product launch? Less in a major channel that underperformed? Use your data-driven hypotheses and apply them to a plan. It’s not going to be perfect, but perfection is not the goal.

Tips and guidelines aside, the simple fact is that nowadays, it’s less important to fuss over how your budget is structured. What’s more important is simply ensuring that every dollar counts. You may be at an established company that requires a fixed annual budget, but the truth is, you have the option of skipping this step altogether. What matters is results, so armed with the knowledge from steps 1 and 2, you need to move as quickly as possible to the next step.


4. Launch and be agile

Today, ad budgets are fast-moving and ever-changing. They’re managed on the fly, in real time. They adapt as you learn, based on immediate results. They are dynamic, responding to incoming data to optimize where ad dollars are being spent. They’re smart and nimble, and they have to be, because unlike the days of guaranteed impressions representing success, today your ad dollars are directly accountable for business results that (you can know) matter. The real work isn’t the upfront negotiation of CPMs, representing weeks or months of planning. The real work begins when the first ads go live and you start processing results and making changes.

Here are some tactics to help you launch and be agile:

  • Use a tool like [Budgets] to consolidate your cross-channel spend and results in one place. It will save time and effort over the alternative of exporting CSV’s and having to pull data from each of your ad channels.
  • Create a testing roadmap or backlog. When something is no longer working, you need new creative, new ads or new channels to test to keep things moving.
  • Don’t underestimate the impact that small changes in your creative can have. The copy that surrounds your video. Zooming in or out on a product image. Turning a static image into a 6 second gif by adding some dynamic text overlay.

The takeaway

Structuring an advertising budget can be as simple or as complicated as you (or your organization) wants it to be. Of course, what’s simple is rarely easy, and it’s no different when it comes to planning and managing your advertising spend. Budgets by Jove and other tools like Insights can help ensure that your spend stays on track and that your ads yield results though. If you have questions or feedback on this topic, we’d love to hear from you at joveinfo@byjove.com

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, last updated on

October 30, 2020

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