I am software developer currently building budget allocation tool for marketing. The idea is simple:
Feed the app with sale data for particular product
Specify your channels of sales
And desired amount for spending
You get back feedback on how much allocation of your budget should go to channels. For example you have Facebook and tiktok ads apart from your Shopify Shop. So 3 channels, say 1000$ , it automatically calculates the channels respective CPM and your possible reach of people. At the end giving you more efficient way of spending your budget.
Is anyone using anything similar to this? If so what is your experiance with such tool so far?
I am not using anything like this, but I have watched a few of these get built and the same wall shows up each time.
CPM and reach give you cost per impression. What a merchant actually wants to know is which channel produced sales that would not have happened anyway. Those two point in opposite directions more often than people expect. Retargeting and branded search almost always look like the cheapest reach in the data, because they touch people who were already on their way to buying. Feed that into an allocator and it will keep shifting budget toward whichever channel is best at taking credit.
The thing that would make me trust the output is some way of separating those. Holdout tests, a geo split, or even just letting the merchant switch one channel off for two weeks and having the tool measure the drop. Without that the model is learning from whatever attribution the sales data already carries, and then it confirms it.
Which source are you feeding it for the product level sales input, order level exports or the marketing attribution numbers? That choice decides a lot about what the tool can honestly claim.
@benii14 ,
Interesting idea. I think a tool like this could be useful but I’d probably want it to look beyond CPM and reach.
As a merchant I’d be more interested in metrics like ROAS, conversion rate, customer acquisition cost (CAC), and even customer lifetime value if the data is available. Sometimes a channel with a higher CPM ends up bringing in better-quality customers who purchase again making it a better long-term investment.
It would also be helpful if the tool could show different budget allocation scenarios for example conservative, balanced, and growth instead of recommending a single split. That would give merchants more flexibility based on their goals.
Hi @benii14
The idea is sound, but I’d focus less on CPM and more on actual margin per order and conversion rates. CPM is the cost of impressions and has no indication if those impressions result in a sale or a profitable sale.
For the Shopify merchant, I’ll be comparing each chanel by spend, attributed revenue, conversion rate, cost to acquire a customer, and profit margin. It would also be useful to attribute for returning customers and channel attribution discrepancies.
A good tool will suggest changes in budget allocation on the basis of incremental profitability, rather than on the basis of reach alone.
Yeah, ROAS can look fine while the actual order is still losing money. Does the tool know each product’s real margin, or is it mostly working from revenue and ad data?