Creating a future scenario

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Why future scenarios matter

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Where to find the future scenario tool

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Configuring your future scenario

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1. Choose a timeframe

• Weekly or multi-week: Typically, you’ll run scenarios for the upcoming week or the next 4 weeks.
• Align with your planning cycle: If your marketing budgets are planned monthly or quarterly, pick a timeframe that matches your planning horizon.

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2. Select your optimization mode

1. Target spend
   • You specify a total budget for the chosen period.
   • Dema will distribute this budget across channels to maximize net gross profit.
2. ROAS target
   • You provide a desired return on ad spend (e.g., 5x).
   • Dema aims to meet this ROAS while maximizing profit across channels.
3. epROAS target
   • You set a target for “effective profit” ROAS, accounting for specific margins or additional costs.
   • Dema focuses on achieving this epROAS objective while distributing spend among channels.
4. Optimize
   • Dema is free to optimize without a specific target.
   • The model will simply maximize profit given all available channels and your existing constraints on spend changes (e.g., ±30%).

Important: If you choose Optimize, you can’t set additional channel-level constraints. Dema has full freedom to allocate budgets as it sees fit for maximum profit. In contrast, if you pick Target spend, ROAS target, or epROAS target, you can set channel-level constraints.

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3. Apply channel-level constraints (optional)

• Minimum or maximum budgets: For each channel or funnel, you can set boundaries (e.g., “No channel under 10% spend”).
• Percentage shifts: You might also tighten or loosen the default ±30% weekly change limit if desired.

Note: These constraints are available only when you select Target spend, ROAS target, or epROAS target. If you choose Optimize, Dema’s model will ignore channel-level constraints and fully optimize to maximize profit.

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4. Run the scenario

• Click “Run scenario” to let Dema’s MMM model process your inputs.
• The tool will generate recommended spend allocations for each funnel or channel, along with predicted profit and other key KPIs (e.g., projected ROAS or epROAS).

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Interpreting your scenario results

1. Compare to baseline
   • See how the proposed spend differs from your current or historical allocation (e.g., previous 4 weeks).
   • Spot significant jumps in spend that may exceed comfort levels or risk platform volatility.
2. Check projected profit and ROAS
   • If you chose a Target spend, verify the distribution and see if the expected profit meets your needs.
   • For ROAS target or epROAS target, confirm the suggested channel mix achieves the goal while still balancing profit.
3. Look for diminishing returns
   • Dema’s curves will highlight if additional spend in a channel will likely plateau or turn unprofitable.
   • Reallocate from channels with high diminishing returns to those with higher incremental profit potential.

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Best practices for future scenarios

1. Start with realistic constraints
   • If the model suggests large budget swings, gradually increase or decrease to avoid shocking ad algorithms.
   • Keep the ±30% default spend change limit if you’re new to scenario planning.
2. Align scenario selection with goals
   • Optimize is ideal if you want the model to purely maximize profit.
   • Target spend is useful if you have a strict budget limit.
   • ROAS target or epROAS target helps maintain a specific performance metric while still allocating for profit.
3. Monitor early signals
   • After implementing the recommended spend changes, watch for unusual fluctuations in CPC, CTR, or conversion rates.
   • Revisit the scenario if performance deviates significantly from projections.
4. Iterate and rerun
   • Dema’s MMM updates weekly, so plan on re-checking your scenario every week or month.
   • Re-run scenarios with updated data and constraints to keep pace with market changes and seasonal shifts.

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Putting it into practice

1. Implement
   • Push Dema’s recommended spend or ROAS goals into your ad platforms (e.g., Google Ads, Meta).
2. Track
   • Compare real-world results against Dema’s forecast.
3. Refine
   • Adjust constraints or targets if you notice discrepancies.
   • Rerun the scenario to see how new data influences the model.

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Example scenario interpretation

1. Total spend is dropping from 176,184 SEK to 119,507 SEK (–32%)
   • This scenario assumes you want to reduce your overall marketing budget for the upcoming period—from 176k down to 119k.
   • Because you’re spending less overall, you’ll see drops in both Gross sales (–27%) and Net gross profit 3 (–21%) at the total level.
   • In other words, the model believes that if your total budget must be reduced, these spend allocations across channels are the most profitable arrangement under that constraint.
2. Channel-level recommendations
   • Google MOF:
     • Spend is proposed to decrease from 53,514 SEK to 16,328 SEK (–69%).
     • While Gross sales fall significantly (–62%), the Net gross profit 3 jumps to 3,712 SEK (+695%).
     • Interpretation: Google MOF was likely past its profitable “sweet spot.” Reducing spend sharply curtails low-margin sales, boosting overall profit for that channel despite much lower revenue.
   • Facebook BOF:
     • A slight increase in spend (+4%), from 28,197 SEK to 29,225 SEK.
     • Gross sales dip a bit (–5%), and Net gross profit 3 shows –13% compared to the last 4 weeks.
     • Interpretation: Even though total profit for this channel is shown as lower than the past 4 weeks, the model still recommends an increase in spend relative to your new, smaller total budget. It sees Facebook BOF as having headroom for profitable conversions—or it may be balancing your ROAS/profit targets in the overall scenario.
   • Facebook TOF:
     • Spend is proposed to decrease from 94,474 SEK to 73,954 SEK (–22%).
     • Gross sales drop by –26%, and Net gross profit 3 is –31%.
     • Interpretation: The model suggests you’re overspending on TOF relative to profit returns. Scaling back should help eliminate less-efficient ad spend and improve overall profitability within your new total budget limit.
3. Why are some channels showing negative changes in profit and sales?
   • Because this scenario forces a much smaller total budget (119k vs. 176k), the model reallocates spend to get the highest net profit possible from that reduced pool of funds.
   • In many cases, cutting spend leads to lower absolute sales—but it can raise margins if you were in a steep “diminishing returns” zone.
   • In other channels, even a small spend increase can look like it reduces profit compared to historical levels if you also changed the mix of other channels or enforced strict constraints.
4. Comparing profit vs. revenue
   • The big takeaway is that Dema prioritizes profit, not just sales.
   • Even if sales or absolute profit is lower than before, the new spend distribution may offer better returns per SEK spent, matching your chosen overall budget or ROAS/epROAS constraints.
5. Next steps
   • Evaluate if a –32% total spend is truly your goal: If your main objective is to free up budget or focus purely on the highest margin, this scenario aligns with that. If not, consider a different total spend or ROAS target.
   • Re-run scenarios: Try adjusting constraints (e.g., a higher total budget or different min/max spends) to see if you can sustain or increase Net gross profit 3 while spending more overall.
   • Implement changes gradually: If the model’s recommended shifts look extreme (e.g., –69% for Google MOF), consider phasing them in (e.g., –30% the first week, –30% the next) to avoid sudden algorithmic or operational disruptions.