How response curves lead to more strategic budgeting and better outcomes

Marketing Mix Modeling (MMM) response curves, also known as advertising response curves, show you how your marketing spend impacts your key business metrics, like sales and revenue, customer acquisition costs, engagement and conversions. Response curves can help you directly quantify your marketing impact and optimize media spend allocation across channels. They’re an essential tool for allowing you to effectively forecast, plan and improve your budget allocation.

Let’s take a look at response curves in more detail.

Here are the three critical points you need to know when interpreting response curves:

1. Threshold Point: This point shows you when your investment starts delivering a return. This point shows the minimum level of investment you need to make for your marketing to measurably influence consumer behavior and impact your metrics. 

💡In action: A cookie brand pays for an end-cap display in a grocery store. Despite high footfall, many shoppers overlook or fail to fully register the end-cap display for the first seven days after the brand installs it. However, in the second week, more and more consumers notice the display — leading to a measurable lift in sales for the brand. 

2. Point of Diminishing Returns: This point shows you when your ROI starts to level off, highlighting that any additional spending beyond this point will only bring lower and lower incremental returns. 

💡In action: An eco-friendly household cleaning brand originally spends $300,000 every week on high-intent keywords, resulting in a 7:1 ROI. They increased their budget to $450,000. However, now they can only bid on less relevant keywords that bring in a lower level of converting traffic — resulting in a 2:1 ROI. 

3. Saturation Point: The saturation point highlights the point at which any additional investment will fail to deliver any incremental value. 

💡In action: An alternative soda brand rolls out a new radio campaign. They spend $15 million on the campaign and see an 80% reach. They invest an additional $5 million in the campaign, but only see an additional 2% increase in reach, failing to generate more sales as their new ads fail to reach their target audience. 

In the CPG space, it’s essential to get a holistic understanding of media performance across channels. 

From retail media to digital, MMM response curves can show you which channels are underutilized, which channels are showing a declining ROI that makes it difficult to justify current or additional spending and which channels are burning through your budget by failing to deliver results after they hit the saturation point. 

Response curves bring transparency and give you more control over your marketing budget. They provide a clear visualization of the financial value and performance of your campaigns and channels. Shelf saturations, short purchase cycles and highly-chanageable consumer behavior mean you need to make strategic use of every single dollar. 

Modern MMMs and response curves can give you a holistic view of sales performance and consumer responses across media, from retail media to TV. They’re a great tool for helping you analyze the performance of your campaigns, ads and channels across many SKUs, locations and quarters. 

Response curves deliver a clear visual representation of every media channel, providing insights into how each one is performing at different investment levels. Curves can help you immediately identify where you’re overspending, which channels are delivering the highest ROI and which channels may possess a hidden opportunity when it comes to sales lift. 

For example, curves may show you that you’re overspending on linear TV, but underinvesting in high-growth channels like retail media or TikTok. 

Curves in CPG: A closer look 

You can use response curves to effectively manage tight margins by directly tying your marketing spend to profit generation. Response curves help you uncover which channels, campaigns and ads are delivering beyond vanity metrics and providing genuine sales uplift — allowing you to reallocate your budget to the ones offering the highest returns and helping you avoid overinvesting your budget in those that are underperforming. 

Response curves are also ideal for helping to balance brand and performance tension — giving you a visual, data-backed representation of omni-channel performance. Curves can help you pinpoint and measure the long-term brand-building impact of your traditional brand-building media channels such as print or TV, while highlighting and isolating the short-term impact of your direct-response channels. By tracking both the immediate and long-lasting impact of each type of channel, you can assess the total incremental value of both approaches, compare their performance and easily calculate the ideal budget allocation for each one. 

Curves show you the point of diminishing returns for both types of channel, helping you avoid over-investing your budget once you hit the point of saturation and allowing you reallocate your budget to a different channel — optimizing the total marketing mix for both short-term sales uplift and long-term brand equity. 

You can also use response curves to manage short sales cycles and improve your short-term sales efficiency by tracking the point of diminishing returns. Curves allow you to focus on tactics and channels that drive immediate sales volume, maximizing every dollar and allowing you to immediately recallocate your budget as soon as you hit the point of saturation.

How can you use response curves to build more effective media guidelines as a CPG brand? Let’s take a look. 

Diagnose current spend vs. performance using your MMM data

As the foundation of using response curves for more effective media planning, the first step is to get insight into how your current spend is impacting performance across your core channels. Add your spend data to your graph on the X-axis and review performance using each of the critical inflection points I covered above: the threshold point, the point of diminishing returns and the saturation point. 

Prioritize making budget adjustments based on what the graph shows. For example, if you’re below the threshold point on a particular channel, then you know you need to prioritize increasing spending, while if you hit the point of diminishing returns or the saturation point then you need to immediately prioritize reallocating your budget. 

Visualize response curves by channel or tactic

For example, if your main channels are print, social media, retail, DTC websites and content — a high level overview of performance on each channel is essential for understanding how spending is impacting your sales. To get more clarity and make it easy to track the performance of each of your core tactics and channels, create separate graphs for each one. 

Also creating separate graphs for your tactics can help you uncover granular performance on what’s contributing to your response curves on the channel level. For example, you may find that your OOH ads are showing a high ROI overall, but your billboards in subway stations are saturated, while digital signage in grocery stores could be scaled further. 

Set guardrails: Budget floors and ceilings based on ROI inflection points

Response curves are a great tool for setting your key guardrails for budget floors and ceilings. 

The threshold point for each channel and tactic points to your budget floor or the minimum spend you need to invest to see a return on investment. Use your threshold point for each channel or tactic to set the ground rules on what the minimum spend for that channel should be to generate returns.

The saturation point shows you the exact point you need to reduce spending and reallocate your budget to another channel or tactic. Set the guideline that spending should not increase beyond this point. 

Reallocate based on marginal return

Average ROI isn’t a reliable guideline when it comes to budget allocations. That’s because it fails to take into account saturation and diminishing returns. To guide your budget decisions more effectively, focus on marginal ROI over average ROI. Say your social channels are showing an impressive average ROI, resulting in $6 for every dollar you spend — these channels may still be completely saturated and further investment may burn through your budget with marginal returns. 

In comparison, marketing ROI (mROI) will show you the specific ROI you’ll see from investing your next dollar, allowing you to strategically reallocate budget so that mROI is equal across channels and campaigns. 

Scenario Plan: Simulate “what if” shifts in spend

Response curves can help you forecast the impact of increasing spending on a specific channel or tactic, allowing you to reliably assess how a change in spending may impact your incremental sales. 

You can use response curves to pre-test media strategies to make sure you’re allocating your budget strategically to the channels and strategies that promise the most ROI. For example, response curves can help you forecast the impact of increasing digital spending by 10% to match your closest competitor — allowing you to forecast the likelihood of success and reduce the risk of overspending on an ineffective strategy. 

CPG response curves case studies

• Response curves helped a snack food brand to identify that one of their core legacy channels, their TV channel, was delivering low incremental returns. They compared the performance of this saturated channel to their other core channels and identified that their retail media network was showing an early steep curve. They quickly reallocated $3 million of their budget to the underleveraged channel — resulting in a noticeable lift in sales. 

• A cereal brand’s marketing team justified a 42% increase in test budget for influencer activations after identifying a convex-shaped curve — which suggested increasing returns. By identifying the curve, they could prove the value of running more tests to help identify high-value areas beyond a linear projection. 

• Repeat ads were leading to audience fatigue and diminishing returns for one haircare brand’s programmatic campaign, by using response curves to quickly identify the saturation point — they reduced wasted spend by reducing spending on the channel and reinvesting it in TV commercials that showed a strong potential for incremental gains. 

You can use Zappi to visualize trends in your data, identify key inflection points and strategically reallocate your budget to your top-performing media channels and strategies. 

Zappi was built to help you analyze how a range of different marketing variables — including price, ad creative and promotions impact consumer responses, sales and ROI across channels. You can use Zappi to directly track how creative and campaigns impact your KPIs, from sales to brand perception — allowing for strategic budget allocation from the earliest stages of development. 

As a centralized platform that can track performance across channels, you can use Zappi to measure creative and campaign effectiveness across your media channels, including digital, TV, social and retail — allowing you to compare response curves and easily track inflection points across each medium.  

Zappi’s Amplify Advertising System is the most predictive ad research system on the market — demonstrating up to 60% more predictive accuracy than other solutions. Amplify explains 80% of the relationship between sales prediction and market mix modeling, allowing you to test with more accuracy. 

"Since partnering with Zappi, our creative effectiveness has improved by 30% across all our advertising. This equates to PepsiCo gaining hundreds of millions in value."

- Stephan Gans, SVP Chief Consumer Insights & Analytics Officer, PepsiCo

While traditional MMMs lean heavily on historical data, Zappi draws from an extensive database of consumer data from storyboards, concepts and final cuts. Zappi was designed to predict market mix model outcomes for more than 200 campaigns and has helped brands successfully test over 5,000 ads.

Here’s how to operationalize your response curves in your 2025 media planning cycle, step-by-step: 

1. Measure channel and tactic performance using response curves in a centralized platform that unifies your data and can provide you with an omnichannel look at performance. 

2. Make a note of underperforming channels, tactics and hidden areas of opportunity.

3. Test with “what if” scenarios — forecasting the increase in sales that are likely to come from increasing spending on a channel or tactic, accounting for diminishing returns. 

4. Use your test forecasts to reallocate budget to channels and strategies with a higher predicted mROI.

5. Track your data and measure the accuracy of your forecasts, refining your strategy and amending budget allocation based on results. 

6. Build an in-house philosophy of circular, data-based learning, in which you use response curve data to support a continuous feedback loop and gain deeper insights in channel, campaign and creative performance. 

To find out more about how Zappi can help you track and quantify creative and campaign performance, head here.