The key to performance marketing is smart spending. Every dollar/euro/pound/naira you spend on a performance media basis should be driven by data – not by intuition based on experience. One of the more difficult – and possibly mistaken – decisions is how to split your (ideally) media marketing budget between prospecting (who is new to your brand) and retargeting (who knows your brand already). If you allocate your budget properly, you are setting yourself up not to waste an acquisition marketing spend in pursuit of scaling – now let’s explore how clever marketers consider data models, seasonal experience and marginal ROIs to inform their budget allocation.
Understanding the Two Sides of The Funnel Prospecting campaigns seek to expand the audience reach to your target audience – you are targeting a cold audience. While prospecting campaigns can often be necessary for growth, they are also the most expensive to acquire the customer.
Retargeting campaigns are more focused on warm leads – these are likely consumers who visit your website, engage with your content or abandoned carts. Retargeting campaigns can be stronger ROAS campaigns because they are converting far stronger because they are converting people who already suppose to know who your are.
One of the common mistakes is leaning too heavily on retargeting campaigns for funding, because they yield immediate outputs. Probably a more common reliance on retargeting campaigns for budgets has grave outcomes – without budget for healthy prospecting top funnel pipeline – eventually you can run out of retargeting potentials.
Step 1 Starting with Data Modelling
The optimum allocation starts with a data-driven framework.
Historical Campaign Data: Examine a minimum of 3-6 months’ worth of spend vs. revenue expenditure – for both prospecting and retargeting.
Incremental Lift Analysis: Determine which campaigns are acquiring customers versus only capturing users who were going to convert anyway.
Funnel Ratios: Chart how many prospecting impressions lead to retargeting opportunities on average – this ratio typically dictates the minimum prospecting advertising expenditure required maintain a healthy funnel.
For example: If historically data tells you the spend of ₹10,000 in prospecting translates into 1,000 site visits and 100 add to carts, you will then know roughly how much retargeting spend is needed to appeal to those users.
Step 2: Include seasonality context
Consumer behavior shifts throughout the year. Complicately seasonality with ad spend or ROI reports will lead to overspend or missed opportunities.
Peak Seasons (holidays or sales events): increase your spend on prospecting to capture a larger share of buyers who are visiting your site & looking for deals.
Off-Peak: Shift more of your budget towards retargeting during off peak times as an opportunity to nurture & convert leads from previous peak periods.
Micro-Seasonality: Monitor weekly or monthly patterns (pay day weekends, industry events, regional holidays etc.) to have a more real-time and dynamic approach to your spending allocation.
Utilizing Google Ads and Meta Ads indication of seasonal trends, layering internal sales history over it provides an even clearer view.
Step 3: Utilize Marginal ROI to Inform Allocation.
Marginal ROI analysis looks at the incremental return for the next unit of spend. Instead of choosing a static percentage (e.g., “70% in prospecting, 30% in retargeting”), you’re constantly asking yourself, “If I put an additional ₹1,000 into prospecting or retargeting, where will I get the highest marginal return?”
This allows for the flexibility to shift budgets based on real-time performance.
For example, once retargeting performance stabilize (meaning you are reaching a point of diminishing returns), you can shift that budget to prospecting in order to build out a bigger audience pool.
Alternatively, if CPA’s in prospecting segment skyrocketed, for example, it’s okay to favor retargeting while testing new messaging and creatives.
More advanced marketers are already developing automated bid strategies and using tool like a custom dashboard to calculate their Marginal ROI daily.
Step 4: Test, Iterate, Automate.
Budget allocation is a process that continues after initial allocation; it is a cycle of testing, evaluation, and revision.
A/B Test Spits: Start with either a 60/40 split or a 70/30 split and look at ROAS every two weeks.
Set Dynamic Rules: Use the platform to set up simple rules (i.e. “increase retargeting budget by 10% if ROAS is higher than 5x for three days in a row.).
Automate: Use tools like Google’s Performance Max or Meta’s Advantage+ to shift spend while still applying your guardrails.
Effective budget allocation is not about enforced ratios. It’s about having total claim and dedication for feeding the funnel with enough new prospects and then optimizing existing audiences for conversion. A data modeling approach can balance the budget allocation process today while being mindful of seasonal disruption, and keeping both eyes on marginal ROI. The decisive ability to balance the present-day needs while cultivating future recommendations means every dollar spends today grow tomorrow.
Performance marketing is about precision and the brands who will win in 2025 will treat budget allocation as a science and not a guess.