How to Conduct an Advertising Spend Study for Businesses

What is "Companies Spend on Advertising Study"?

A "Companies Spend on Advertising Study" is a systematic analysis of how businesses allocate their marketing budgets across channels, campaigns, and vendors to measure efficiency and strategic alignment. It moves beyond simple expense tracking to diagnose the health and return on investment (ROI) of advertising activities.

Without this analysis, businesses operate blindly, risking significant budget waste on underperforming channels and missing opportunities for optimization. The core frustration is pouring money into advertising with no clear understanding of what drives growth or drains resources.

• Advertising Spend Analysis: The process of collecting, categorizing, and evaluating all advertising expenditures to understand cost distribution.
• Channel Performance Benchmarking: Comparing the cost and return of different advertising platforms (e.g., social media, search, programmatic) against industry or internal standards.
• Vendor Cost Efficiency: Assessing whether fees paid to agencies, freelancers, or software platforms are justified by the results they deliver.
• Marketing Mix Modeling (MMM): A statistical analysis technique used to estimate the impact of various marketing tactics on sales and determine the optimal budget allocation.
• Return on Advertising Spend (ROAS): A key metric calculated by dividing revenue attributed to advertising by the cost of that advertising.
• Attribution Modeling: The set of rules that determines how credit for sales and conversions is assigned to touchpoints in conversion paths.
• Operational Waste Audit: Identifying areas of spending that do not contribute to strategic goals, such as redundant tools or poorly negotiated contracts.
• Competitive Spend Intelligence: Using available data to estimate competitors' advertising strategies and budget allocations for market positioning.

This study is most critical for marketing leaders needing to justify budgets, procurement teams managing vendor costs, and founders ensuring limited resources are not wasted. It directly solves the problem of inefficient capital allocation in growth initiatives.

In short: It is the essential financial audit of your marketing efforts, transforming raw spend data into a strategic roadmap for efficient growth.

Why it matters for businesses

Ignoring a disciplined study of advertising spend leads to a gradual erosion of profitability, where marketing becomes a cost center rather than a growth engine, ultimately stifling scale and competitiveness.

• Unchecked Budget Leakage: Small, unexamined fees for underused tools or inefficient campaigns compound into major financial drains. A regular spend study plugs these leaks by enforcing accountability for every line item.
• Misalignment with Business Goals: Spending can drift towards "shiny object" channels or legacy vendors that no longer serve strategic objectives. Systematic analysis forces spend to be tied to specific, measurable key performance indicators (KPIs).
• Vendor Lock-in & Stagnation: Long-term relationships with agencies or platforms can lead to complacency and rising costs without performance reviews. A study provides the data needed to renegotiate terms or justify a switch.
• Inability to Scale Efficiently: Without knowing which channels are most efficient, scaling budgets often means amplifying waste. This analysis identifies the true leverage points for sustainable growth.
• Poor Stakeholder Confidence: Executives and finance teams lose trust in marketing when expenditures are not clearly linked to results. A transparent spend study builds credibility and secures future budget approvals.
• Reactive, Not Proactive Strategy: Businesses become trapped in a cycle of chasing last period's results without a forward-looking investment plan. Historical spend analysis informs predictive budget modeling.
• Vulnerability to Market Shifts: Changes in platform algorithms or audience behavior can abruptly invalidate a spending strategy. Continuous spend analysis acts as an early warning system for such disruptions.
• Wasted Human Capital: Teams spend excessive time managing fragmented tools and reporting instead of on strategic work. Streamlining spend based on analysis frees up valuable internal resources.

In short: It matters because it transforms advertising from an opaque expense into a quantifiable, manageable, and optimizable business investment.

Step-by-step guide

Tackling advertising spend can feel overwhelming due to fragmented data across platforms, internal departments, and vendor invoices.

Step 1: Consolidate all spend data

The primary obstacle is data silos—information trapped in separate ad accounts, bank statements, and contractor invoices. Your first action is to create a single source of truth.

• Gather financial records: Collect all invoices, credit card statements, and procurement records related to marketing and advertising from the last 12-24 months.
• Export platform data: Pull cost data from every advertising platform used (e.g., Google Ads, Meta, LinkedIn, programmatic dashboards).
• Centralize: Use a spreadsheet or business intelligence tool to consolidate all entries with consistent date, amount, vendor, and campaign/channel columns.

Step 2: Categorize every expense

Uncategorized spend is unmanageable spend. Overcome the vagueness of line items like "marketing services" by applying a clear taxonomy.

Create categories such as Channel Spend (e.g., Paid Search, Social Advertising), Vendor Fees (e.g., Agency Retainer, Software Subscription), and Production Costs (e.g., Content Creation, Ad Design). Tag each expense with one primary category. A quick test: you should be able to filter by "Paid Social" and see your total Meta/LinkedIn/TikTok ad spend plus any managing agency fees.

Step 3: Map spend to business outcomes

The critical failure is viewing spend in a vacuum, detached from results. Link your categorized expenses to relevant performance metrics.

Align channel spend with platform-reported conversions, lead volume, or revenue (using your attribution model). For vendor fees, link them to the outcomes they support—e.g., the software subscription cost against the projects it enabled. This step requires close collaboration between finance and marketing operations.

Step 4: Calculate core efficiency metrics

Raw numbers are not insights. The obstacle is not knowing which metrics truly matter for your business stage and goals.

For each category, calculate metrics like ROAS, Customer Acquisition Cost (CAC), and Cost per Lead (CPL). For non-performance vendor fees, calculate cost as a percentage of total managed spend or against output metrics (e.g., cost per created asset). This creates an apples-to-apples basis for comparison.

Step 5: Benchmark internally and externally

Without context, you cannot judge if a 5:1 ROAS is good or poor. Internal benchmarking compares performance across your own channels and time periods.

For external context, use industry reports from trusted sources (e.g., trade associations, analyst firms) cautiously, noting that averages vary widely by sector. The real value is in establishing your own internal benchmark trends to track progress against.

Step 6: Identify optimization opportunities

Analysis paralysis is common here. Systematically review your data to spotlight clear actions.

• Reallocate budget: Shift funds from low-efficiency/high-cost channels to higher-performing ones.
• Renegotiate or replace: Target vendors with high fees and low measurable impact for contract review or a replacement search.
• Eliminate waste: Cancel unused software subscriptions or discontinue persistently underperforming campaign types.

Step 7: Formalize a tracking and review cadence

The mistake is treating this as a one-time project. The solution is to institutionalize the process.

Implement a monthly review of high-level spend vs. performance and a comprehensive quarterly deep-dive. Assign clear ownership for data collection, analysis, and reporting to ensure continuity.

In short: Consolidate data, categorize it, link it to outcomes, calculate efficiency, benchmark, optimize, and institutionalize the review cycle.

Common mistakes and red flags

These pitfalls are common because they offer short-term convenience but create long-term strategic blindness.

• Relying solely on platform-reported costs: This misses agency markups, software costs, and internal labor, painting a deceptively rosy picture of efficiency. Fix: Always use total all-in cost from your financial records for calculations.
• Chasing vanity metrics instead of business metrics: Optimizing for clicks, impressions, or even engagement can drain budget without driving leads or sales. Fix: Define and track metrics that directly correlate to pipeline and revenue, even if they are harder to measure.
• Analyzing channels in isolation: Viewing social media ROAS without considering its role in top-of-funnel branding that aids search conversion misjudges value. Fix: Use multi-touch attribution models or marketing mix modeling to understand channel synergy.
• Neglecting non-working spend: Focusing only on media buy costs while letting vendor fees and tool costs balloon unchecked. Fix: Regularly audit "fixed" costs like agency retainers and SaaS tools for value delivered.
• Failing to establish a pre-study baseline: Making changes without a clear before-and-after snapshot makes it impossible to measure the impact of your optimizations. Fix: Document key metrics and total spend before implementing any major shifts from your analysis.
• Using inconsistent time periods: Comparing one month of ad spend to a full quarter of revenue data creates distorted metrics. Fix: Align all cost and revenue data to identical date ranges, accounting for sales cycles.
• Treating all customers as equal: Not segmenting CAC or LTV (Lifetime Value) can lead to overspending to acquire low-value customers. Fix: Segment your analysis by customer type, product line, or region to uncover true profitability.
• Procrastinating due to "imperfect data": Waiting for a perfect attribution model or complete dataset means you never start optimizing. Fix: Begin with the best available data, document your assumptions, and refine as you improve your tracking.

In short: Avoid these mistakes by focusing on total all-in cost, business-aligned metrics, channel synergy, and actionable baselines, even with imperfect data.

Tools and resources

The challenge is navigating a crowded market of tools that each solve only part of the spend analysis puzzle.

• Marketing Analytics Platforms: Use these to unify data from multiple advertising channels and visualize performance against spend. They address the problem of fragmented data but often lack comprehensive vendor cost integration.
• Business Intelligence (BI) & Data Visualization Software: Ideal for building custom dashboards that combine advertising platform data with internal financial and CRM data. They solve the need for a completely tailored, holistic view.
• Procurement & Spend Management Software: These tools are designed to track all vendor contracts, subscriptions, and invoices. They address the problem of unmanaged non-working spend and contract renewal deadlines.
• Attribution Modeling Tools: Use these to move beyond last-click attribution and understand how channels work together. They solve the misallocation of budget based on an incomplete view of the customer journey.
• Financial Planning & Analysis (FP&A) Software: Critical for integrating the marketing budget with the company's overall financial plan and forecasting. They solve the disconnect between marketing spend and corporate financial health.
• Industry Benchmark Reports: Reports from professional bodies (e.g., IPA, IAB) and analyst firms provide context for your metrics. They address the "is this good?" question but should be used as directional guides, not absolute targets.
• Specialized Marketing Mix Modeling (MMM) Services: Employ these for advanced, statistical analysis of long-term marketing impact, especially when digital attribution is fractured. They solve for strategic, long-term budget allocation in complex environments.

In short: Choose tools based on whether you need data unification, financial control, advanced attribution, or strategic modeling, often requiring a combination.

How Bilarna can help

A core frustration in optimizing advertising spend is the difficulty of efficiently finding, comparing, and engaging with new, high-potential service providers or software tools.

Bilarna is an AI-powered B2B marketplace that connects businesses with verified software and service providers. When your spend analysis reveals a need to replace an underperforming agency, find a more cost-effective analytics platform, or source a specialist for a new channel, Bilarna streamlines that search.

The platform's AI matching considers your specific project requirements, budget, and company profile to surface relevant, vetted options. This reduces the time, risk, and uncertainty typically involved in vendor discovery, allowing you to act quickly on the optimization opportunities your study uncovers.

By providing a centralized venue to compare verified providers, Bilarna helps turn the strategic decisions from your advertising spend analysis into operational reality with greater confidence.

Frequently asked questions

Q: How often should we conduct a comprehensive advertising spend study?

A: Perform a full, deep-dive analysis at least quarterly. This aligns with typical business quarters and allows you to react to trends without being overly reactive. Monthly, you should review high-level spend versus key performance indicators to catch any major deviations. The pace of change in your industry may necessitate more frequent reviews.

Q: What is a good ROAS target for our business?

A: There is no universal "good" ROAS; it depends entirely on your business model, margins, and growth stage. A company with high gross margins can sustain a lower ROAS than one with thin margins. The critical next step is to calculate your target ROAS based on your acceptable customer acquisition cost (CAC) and customer lifetime value (LTV). Use your own break-even point as the primary benchmark.

Q: We use multiple attribution models (last-click, first-click, linear). Which one should we use for the spend study?

A: For consistency, choose one primary model for your core analysis—often a data-driven or linear model is most representative. The key is to acknowledge the limitations of any single model. Run your spend study using your primary model, but note where conclusions would dramatically change under a different model. This highlights areas where your attribution understanding is weakest.

Q: How do we account for the brand-building impact of advertising that doesn't drive immediate conversions?

A> This is a major limitation of short-term, conversion-focused metrics. To address it, allocate a portion of your budget explicitly to brand-building activities with different success metrics, such as aided/unaided brand recall, share of voice, or website direct traffic. In your spend study, track this budget separately and evaluate it over a longer time horizon (6-12 months) using marketing mix modeling or correlated lifts in overall conversion efficiency.

Q: Our agency bundles all costs into a single monthly fee. How can we analyze this?

A> Require a detailed monthly breakdown from your agency showing media costs, platform fees, and their management fee separately. This is a standard practice for transparent partnerships. If this isn't provided, it's a significant red flag. For your study, you cannot analyze channel efficiency without the media cost component. Your next step is to formalize this reporting requirement in your contract or begin searching for a more transparent provider.

Q: What is the first thing we should do if our study shows poor overall efficiency?

A> Before cutting budgets indiscriminately, conduct a granular performance audit of your highest-spend channel. Often, 80% of waste is concentrated in 20% of activities—like poorly structured campaigns, irrelevant targeting, or low-quality ad creative. Pause only the identifiably underpererving segments within that channel, not the entire channel, and reallocate that budget to your best-performing segments as a controlled test.