TL;DR:
- 70% on proven channels, 20% on emerging opportunities, 10% on experiments
- Monitor channel CAC monthly, adjust allocation quarterly
- Next step: [Run a marketing optimization audit →]
Most successful companies follow the 70/20/10 rule: 70% on proven channels, 20% on emerging opportunities, 10% on experiments. But this only works if you monitor CAC by channel and maintain healthy MER. Adjust allocation monthly based on performance, not annually based on hope.
You’ve determined your marketing budget is $50,000 monthly. Now what?
Put it all in Google Ads because “that’s where the buyers are”? Split evenly across channels because “diversification”? Double down on what worked last year and hope it keeps working?
The truth is, how you allocate your budget matters more than how much you spend. A perfectly sized budget allocated poorly performs worse than a smaller budget allocated strategically.
Before diving into allocation, ensure you’ve determined the right total investment using a proper budget framework. Allocation without proper budget sizing is like perfectly arranging deck chairs on a sinking ship. Got your number? Let’s make it work harder.
The 70/20/10 framework that drives growth
After observing marketing budgets across industries, one pattern consistently emerges among successful companies: they follow some version of the 70/20/10 rule (popularized by Google’s portfolio approach and widely adapted for marketing).
This isn’t arbitrary. It’s portfolio theory applied to marketing. Just like smart investors balance stocks, bonds, and alternatives, smart marketers balance proven performers, growth opportunities, and innovation bets.
70% – Your proven performers
This is your foundation. Channels that consistently deliver results within acceptable CAC ranges. They’re boring, predictable, and absolutely essential.
These channels typically have:
- CAC below your threshold (usually less than 3x average order value)
- Consistent MER contribution above 3.0
- Predictable volume you can count on
- Clear attribution and measurement
For most B2B companies, this includes organic search, email to existing lists, and branded paid search. For e-commerce, it’s often email, Google Shopping, and Facebook retargeting.
The unit economics test: If a channel’s CAC exceeds 3x your average order value or payback extends beyond 12 months, it’s not proven. It’s problematic. As we detail in our CAC calculator, sustainable growth requires proper unit economics. [Calculate your CAC by channel →]
Don’t confuse “we’ve always done this” with proven. Proven means profitable, scalable, and measurable. Everything else is hope.
20% – Emerging opportunities
These channels show promise but haven’t earned proven status yet. They’re graduating from experiments but need more data before you bet the farm.
Maybe it’s LinkedIn Ads showing early traction. Or that influencer partnership delivering quality leads. Or content marketing finally gaining organic momentum.
Emerging channels can have 50% higher CAC initially. That’s normal. But they need to show improvement within 90 days. Monitor weekly, decide monthly. If CAC isn’t trending toward proven channel benchmarks, reallocate.
The patience principle: Emerging channels need 3-6 months to prove themselves. Don’t scale too early (waste) or cut too quickly (missed opportunity).
10% – Your innovation fund
This is your R&D budget. Your permission to try crazy ideas. Your hedge against disruption.
Expect most experiments to fail. That’s not just normal. It’s the goal. You’re looking for the one or two experiments that return exceptional results and become tomorrow’s proven channels.
Today’s experiments might be:
- AI-powered chat marketing
- TikTok for B2B (yes, really)
- Interactive calculators
- Podcast sponsorships
- Community building
Track everything, but don’t optimize too early. Give experiments 60 days minimum before judging. This is where tomorrow’s 70% comes from.
Bottom line: Every proven channel was once someone’s crazy experiment.
Allocation by business model
The 70/20/10 framework adapts to your business reality. Here’s how successful companies typically allocate:
B2B SaaS allocation
Proven (70%):
- Content/SEO: 30%
- Paid Search: 25%
- Email: 15%
Emerging (20%):
- LinkedIn Ads: 10%
- Webinars: 10%
Experimental (10%):
- Podcasts, communities, interactive tools
MER target: 3.0-5.0 Key metric: CAC payback period by channel
The pattern here: heavy investment in owned channels (content, email) that compound over time. Paid channels support but don’t dominate.
E-commerce allocation
Proven (70%):
- Google Shopping: 30%
- Facebook/Instagram: 25%
- Email: 15%
Emerging (20%):
- TikTok Ads: 10%
- Influencers: 10%
Experimental (10%):
- Live shopping, AR try-ons, new marketplaces
MER target: 2.5-4.0 Key metric: First-purchase CAC vs lifetime value
E-commerce lives and dies by paid social and shopping ads. But notice email still commands 15%. Retention is cheaper than acquisition.
Professional services allocation
Proven (70%):
- Referral systems: 25%
- Content/SEO: 25%
- Email: 20%
Emerging (20%):
- Paid Search: 10%
- LinkedIn: 10%
Experimental (10%):
- Podcasts, speaking, partnerships
MER target: 4.0-8.0 Key metric: Cost per qualified lead by source
Professional services can maintain higher MER because of high margins and referral effects. Note the heavy investment in referral systems. Most firms underinvest here.
When to adjust your allocation
Static allocation is dead allocation. Modern marketing requires dynamic rebalancing based on real performance data.
The performance triggers
MER drops below target:
- Immediate action: Audit channel-specific CAC
- Find the culprit: Which channel’s CAC increased?
- Reallocation: Shift from worst to best performer
- Timeline: Make changes within 7 days
The MER framework we explore in detail provides your ecosystem health check. [Learn more about MER monitoring →]
CAC exceeds payback threshold:
- If channel CAC payback > 12 months: Reduce by 50%
- If channel CAC > 2x average: Investigate immediately
- If channel CAC > 3x average: Pause and audit
The quarterly optimization trigger: Run a marketing optimization audit every quarter. The results directly inform allocation. Found waste? That becomes your new experimental budget. Identified scaling opportunity? Shift emerging budget there.
The growth stage triggers
Startup mode (under $1M revenue): Flip to 50/30/20. You need more experiments to find product-market-channel fit.
Scale mode ($1-10M revenue): Standard 70/20/10 works perfectly. You’ve found what works; now systematize it.
Optimization mode ($10M+ revenue): Consider 80/15/5. You know what works. Incremental improvements matter more than radical experiments.
Warning: Changing allocation without measuring impact is gambling. Set baseline MER and channel CAC before any shift. Measure again 30 days later. Only then decide if the change worked.
The unit economics override
Sometimes math trumps percentages. When unit economics break, standard allocation breaks with them.
Scenario 1: High-CAC environment Your CAC increased significantly across all channels. Response: Shift to 50/30/20 (reduce proven, increase experiments). Why? You need to find new efficient channels fast. The old playbook stopped working.
Monitor: Weekly CAC by channel. Reallocate monthly based on performance.
Scenario 2: Cash flow constraints You need profitability in less than 6 months. Response: 85/10/5 (maximize proven, minimize risk). Why? You can’t afford long payback periods.
Monitor: Daily cash position. Only fund channels with sub-90-day payback.
Scenario 3: Funded hypergrowth You raised capital for aggressive expansion. Response: 60/25/15 (increase risk tolerance). Why? Market share matters more than efficiency temporarily.
Monitor: MER can drop to 2.0 if growth rate justifies it. Below that, even VCs get nervous.
The formula that overrides everything
If (Channel CAC × 3 < LTV) AND (Payback < 12 months)
→ Scale that channel
Else if (Channel CAC × 2 < LTV) AND (Payback < 18 months)
→ Maintain that channel
Else
→ Cut that channel
This formula beats any percentage allocation. Math doesn’t care about your framework.
Three allocation patterns from the field
Pattern 1: The MER-driven pivot
Situation: B2B SaaS company, $30K monthly budget. MER dropped from 4.0 to 2.5 over two quarters.
Analysis: Facebook CAC increased dramatically (iOS changes), Google stable, email performing well.
Reallocation: Shifted Facebook budget (15% of total) to Google and content. Increased email from 10% to 20%.
Result: MER recovered to 3.5 in 60 days. Lesson: When channels break, move fast.
Pattern 2: The CAC discovery
Situation: E-commerce brand, $50K monthly budget. Even split across 5 channels.
Discovery: Email CAC = $12, Paid Social CAC = $85, Google Shopping CAC = $45.
Reallocation: Doubled email investment, maintained Google, cut social by 50%.
Result: Same revenue, 35% less spend. Lesson: Channel CAC can vary dramatically. Measure everything.
Pattern 3: The experimental win
Situation: Professional services firm, $20K monthly budget. Stuck in 70/20/10 for two years.
Experiment: Allocated 10% to podcast sponsorships. CAC came in 50% below average.
Reallocation: Scaled podcasts from 10% to 30% over 6 months. Moved Google Ads to emerging.
Result: More leads at lower cost. Lesson: Yesterday’s experiment is tomorrow’s foundation.
Common allocation mistakes to avoid
Mistake 1: Ignoring the assist effect Email shows amazing CAC because it captures demand created by other channels. Don’t over-allocate to last-touch winners. Use MER to see the full picture.
Mistake 2: Optimizing without baselines Shifting budget without knowing current channel CAC and contribution to MER is flying blind. Measure first, reallocate second, celebrate third.
Mistake 3: Annual allocation planning Your competitors adjust monthly. You’re adjusting annually. Guess who wins? Modern allocation is dynamic, based on real-time CAC and MER data.
Mistake 4: Confusing spend with investment Cutting “expensive” channels that drive growth is like canceling your best salesperson’s salary because it’s your biggest expense. Judge by return, not by cost.
Mistake 5: The diversification trap Spreading budget across 10 channels when you can only properly manage 3 guarantees mediocrity. Better to dominate 3 channels than dabble in 10.
Your allocation audit checklist
Monthly allocation review
- Calculate MER for past 30 days
- Calculate channel-specific CAC
- Identify bottom 20% performers
- Identify top 20% performers
- Check experimental budget results
- Adjust allocation based on data
Quarterly deep dive
- Run full optimization audit
- Review allocation vs business goals
- Check if budget total is still correct (use budget framework)
- Assess new channel opportunities
- Plan next quarter’s experiments
Signs you’re allocated correctly
-
- MER steady or improving
- CAC by channel within benchmarks
- 70% driving predictable results
- 20% showing promise
- 10% learning something new
- Monthly adjustments under 10%
- Quarterly pivots when needed
Frequently asked questions
How does CAC affect allocation decisions?
Directly. Channels with CAC exceeding payback thresholds get reduced budget. Channels with improving CAC get increased budget. Calculate channel-specific CAC monthly and adjust accordingly.
Should allocation change if MER is healthy?
Not necessarily. Good MER means your mix is working. But still test. Shift 10% quarterly to find better opportunities. Complacency kills growth eventually.
What if our best channel is getting expensive?
First, define “expensive.” If CAC × 3 still falls below LTV, it’s not expensive. It’s scaling. If payback extends beyond your cash runway, then it’s expensive. Context matters more than the number.
How do we allocate with limited budget?
Under $10K monthly? Pick 2-3 channels maximum. Focus beats spread at small budgets. Choose channels where your CAC can compete. Better to dominate one channel than fail at five.
When should allocation favor brand building?
When MER is healthy but growth is slowing. Brand investment looks wasteful short-term but drives long-term MER. Allocate 10-20% to brand when you can afford patience.
How often should we rebalance?
Review monthly, adjust quarterly, overhaul annually. Constant reallocation creates chaos. Measure, analyze, then move decisively.
What if a channel works but we can’t measure it?
If overall MER is healthy and the channel passes logical tests, keep funding it. Not everything measurable matters, and not everything that matters is measurable.
Should we cut channels that just maintain?
No. Maintenance channels provide stability. They might not grow the business, but they prevent decline. Keep them in the 70% unless something better emerges.
How do we know when an experiment has failed?
Give it 60-90 days minimum. If CAC is infinite (no conversions) after 60 days, cut it. If CAC is simply high, give it 90 days to improve. Document lessons learned.
What about seasonal allocation changes? Seasonality overrides standard allocation. Q4 for e-commerce, tax season for financial services. Shift to proven channels during peak seasons, experiment in quiet periods.
Making allocation decisions that compound
Perfect allocation requires constant optimization based on real data. But monitoring channel CAC, maintaining MER targets, and adjusting monthly while running campaigns is overwhelming.
The companies that win at allocation share three characteristics:
- They measure everything but don’t overreact to everything
- They follow the framework but override it when math demands
- They document what works and systematize it
Your allocation strategy is where strategy meets reality. Where your marketing budget turns into actual campaigns. Where efficiency is won or lost.
The 70/20/10 framework gives you structure. Unit economics give you guardrails. Regular optimization keeps you ahead of decay. Together, they turn budget into growth.
Want expert help optimizing your allocation? We’ll analyze your channel performance, benchmark your CAC against industry standards, and create a dynamic allocation plan that adjusts based on real results.
Schedule a consultation to turn your budget into a growth engine that actually works.
Note: Allocation percentages are directional frameworks based on observed patterns. Your specific allocation should be driven by your unique CAC, MER, and business objectives.
