How to Set Media Budgets for Maximum ROI: A Guide to the Meridian Optimiser

You’ve successfully trained your MMM model using Meridian. Now is the time to take that to the next step. How do I take action?

One of the core outputs of an MMM is to focus on cross-channel budget allocation.

1. Setting Up & Running Meridian Optimiser

Use the commands below to run the three primary factors that start the optimisation process:

1. Budget_optimizer: Sets up the optimisation process
2. Optimization_results
   1. Understanding the level for each channel at which you can spend
   2. Within the brackets, you can define the target of the optimisation
3. Optimization_results.plot_response_curves
   1. Plotting the response curves/ diminishing returns curve
   2. Charting current vs. optimal spend

2. How to interpret Meridian Optimiser

Users can take many insights from the Meridian Optimiser to help plan individual channel budgets or cross-channel spend levels. In particular, answer the questions:

• What’s the Optimal budget level for each individual channel? (see chart below)
• How should I allocate a fixed Media budget for each individual channel? What happens if we spend £/$1m extra?
• How much incremental revenue or new customers will my spend drive? (see on the Y-axis of the chart below)
• The change for each Media channel in the spend level & forecast revenue

The chart shows an example media channel curve comparing non-optimised spend vs. optimised spend.

3. A need for flexibility in Budget allocation?

Here is the challenge with using Budget allocation or optimisation. It assumes that all future scenarios are based on what has happened in the past.

The reality is that making budget allocation decisions is more than just what you have measured in the past. The next step is to make it future-facing. To do this, we want to overlay

• Inflation: digital marketing channels (such as Meta & Google Search) have seen rising costs
• Creative: The new creative being launched or the edits you have made. What degree of impact will that have?
• Wider economic conditions: How do changes to the wider economic conditions, the market or key seasonal periods impact your media budgets

You can overlay the first two of these into the Meridian Optimiser. Wider economic conditions are not currently factored in Meridian Optimiser (the Linea Scenario Tool does allow this).

The core mechanism for incorporating future or hypothetical market conditions is the new_data argument available in the post-modelling analysis methods, particularly those related to the BudgetOptimizer class.

This new_data object allows you to override the model's default assumptions, which come from the past date, for the future planning period.

4. Who should be the owner of the Budget allocation?

The process of ensuring the success of your optimisation will not just depend on the scenarios and the assumptions that you make. An important part is the ownership process.

If you are a data scientist/ analyst who has run the Meridian model, channel-level budget decisions impact multiple users. How are you gaining buy-in for these recommendations?

• Marketing (CMO/ MD/ Marketing Managers): Ultimately, the success of the budget that you are recommending is the responsibility of this team.
• Marketing Agency/ Marketing Channel Managers: You are reviewing the performance of and setting the budget for a knowledgeable set of marketing experts. This team will have ideas about strategy & tactics that could contradict or complement the allocated budget.
• Data/ Finance teams: The outputs of the scenarios are going to feed into future predictions of revenue & new customers. These outputs need to be reported alongside these teams.

You can approach handing over this responsibility in a number of ways to ensure the success of the budget-setting process.

At Linea, we have built the Linea Scenario Tool to democratise access to running budget allocation. This tool allows you to move out of a code-based environment and use the software to run, compare & set your media budget.

In addition, it allows the user a variety of flexibility to set the time period, key constraints, overlay channel multipliers & importantly, take into account the wider market context. Want to find out more? Then click the link below