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Reallocate channel budgets using an MMM read-out

This job resets channel-level budget shares for the coming quarter based on marginal ROAS from the latest MMM read-out. It feeds the quarterly media plan sign-off, where finance and the channel leads approve the new spend split.

What you need first

  • Quarterly MMM output with marginal ROAS and saturation curves per channel, from the analytics/MMM vendor
  • Current quarter's committed spend by channel, from the live media plan
  • Contract minimums and cancellation notice periods per channel, from the signed insertion orders
  • Finance-approved total budget ceiling for the quarter, from the finance sign-off document
  • Booking lead times and cutoff dates per channel, from each channel's trading desk or ad server

The procedure

  1. Pull marginal ROAS per channel at current spend from the MMM output, not the topline average ROAS, to see where the next euro actually performs best
  2. Rank channels by marginal ROAS to flag the outperforming channel and the channel with the weakest marginal return as the funding candidate
  3. Read the outperforming channel's saturation curve to find its headroom, the spend level where marginal ROAS drops to the market floor
  4. Check the funding channel's contract minimum and notice period to cap how much can actually be pulled out this quarter
  5. Set the shift amount as the smaller of the saturation headroom and the contractually available cut, then rebuild both channels' new spend lines so the total stays on budget
  6. Project incremental revenue by multiplying the shift by each channel's marginal ROAS across the increment and net the gain against the loss
  7. Write the reallocation memo with old and new spend by channel, the net revenue delta, and the booking deadline for executing the change

Worked through with numbers

Quarter budget is €2,000,000 split TV €800k, Search €500k, Display €300k, Paid Social €400k. MMM marginal ROAS at current spend: TV 1.8, Search 3.1, Display 1.5, Paid Social 4.2. Paid Social's saturation curve shows marginal ROAS holding above 3.0 out to €550k, giving €150k of headroom. Display's contract sets a €200k minimum, so the most that can be pulled out is €300k − €200k = €100k, smaller than the €150k headroom, so €100k is the shift size. New spend: Display €200k, Paid Social €500k, total still €2,000,000. Revenue effect: Display loses €100k × 1.5 = €150k; Paid Social gains €100k × 4.0 average marginal ROAS across that band = €400k. Net incremental revenue = €400k − €150k = €250k on an unchanged total budget. A positive net on flat spend confirms the shift is additive rather than a wash, and the gain shrinks fast if the shift size creeps past the €150k saturation point.

Where it goes wrong

  • Price the shift using marginal ROAS at the new spend level, since the topline average ROAS in the MMM summary overstates headroom on a channel that's already close to saturation
  • Check contract minimums and notice periods before sizing the shift, since a plan built on spend you can't actually cancel this quarter gets stuck at sign-off
  • Apply the saturation curve's declining marginal ROAS across the added spend rather than the single point estimate at current spend, since a flat rate overstates the gain on the last euros moved in
  • Re-run the shift against next quarter's seasonality index rather than the quarter just measured, since MMM read-outs are backward-looking and a channel entering a seasonal dip absorbs the extra spend at a lower real return than the curve shows

How to know it is right

Recompute total spend across all channels to confirm it still matches the finance-approved ceiling, and confirm the net revenue delta is positive after netting the funding channel's forgone revenue against the gaining channel's marginal return.

Terms used

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