What is a Budget Allocation Model?

A budget allocation model is a structured framework used by growth marketing teams to optimize the distribution of paid media budgets across different channels. This model ensures that ad spend is allocated based on performance, scalability, and efficiency rather than guesswork.

The GrowthPair Budget Allocation Model was inspired by a system originally developed at Postmates to help maximize return on ad spend (ROAS) while balancing growth and efficiency across multiple acquisition channels. The model dynamically adjusts spend allocation based on past performance and projected scalability.

Why is budget allocation important?

Growth marketing teams manage multiple paid channels, each with its own performance metrics, cost efficiency, and scalability constraints. Without a structured approach to budget allocation, teams risk over-investing in underperforming channels or capping potential growth in high-performing ones.

A data-driven budget allocation model ensures:

• Capital Efficiency – Allocating more spend to channels with the highest efficiency and room to scale.
• Scalability Awareness – Avoiding diminishing returns by factoring in channel saturation and marginal CPA increases.
• Performance Optimization – Dynamically adjusting budgets based on real-time results rather than fixed allocations.
• Consistent Growth – Ensuring marketing spend is aligned with business goals and revenue targets.

How does the GrowthPair Budget Allocation Model work?

The model takes three core inputs to determine budget distribution across channels:

1️⃣ Last Month's Spend – Understanding how previous investments were distributed.

2️⃣ Last Month’s CPA – Analyzing cost-per-acquisition efficiency per channel.

3️⃣ This Month’s Budget – Factoring in available spend for reallocation.

Key Factors Considered in the Allocation Process:

• MoM Scalability – Evaluates whether a channel can handle more spend without drastically increasing CPA.
• Performance Trends – Identifies which channels are improving or declining in efficiency.
• Diminishing Returns Analysis – Prevents overfunding channels with a limited ability to scale profitably.
• Reallocation Logic – Shifts budget from lower-efficiency channels to those with higher potential.

By running this model, growth teams can make real-time, data-backed decisions on how to deploy their ad budgets across paid channels like Meta, Google, TikTok, and more.

Who is responsible for budget allocation?

Budget allocation typically falls under growth marketing and paid acquisition teams, but collaboration with finance and leadership is crucial for setting high-level targets. The process often involves:

1. Growth Marketers – Own the execution, ensuring budgets are distributed based on performance insights.
2. Finance Teams – Align marketing spend with broader company budget constraints and goals.
3. CMOs / Growth Leads – Provide strategic direction on balancing efficiency with aggressive scaling.

This Budget Allocation Model ensures that every dollar spent is optimized for the highest return. Download the model now and start making data-driven budget allocation decisions for your paid marketing efforts.