Everything is a test

Defining your cohort profitability thresholds is a good start to optimizing your marketing campaigns. Once you've nailed your cohort-based LTV analysis, you'll be faced with a series of questions around how to distribute marketing budget. My methodology for budget allocation is to continuously scrutinize all acquisition efforts.

Treat all marketing campaigns as a test

Never get attached to any particular marketing campaign or medium. What works today may not work tomorrow, and in a month you may get access to new channels that outperform all of your current marketing efforts.

Here's a visual representation of the methodology:

As you are likely working with a roughly pre-defined budget (even if set by you), it's good practice to define optimization rules and expansion triggers before you have results of your marketing spend. 

Treating all campaigns against the same LTV payback thresholds creates comparable relative performance indicators that suggest where you should distribute budget in the future. As an example, this is similar to how a scarf manufacturer will approach product line composition, where even though they may produce 500 scarf variants, over time the manufacturer will see which scarves outsell others, consequently adjusting its product composition towards best sellers.

Once you have cohort results, your marketing efforts will fall into one of three actionable categories.

1. EBITDA contributing cohorts: These profitable cohorts and campaigns have paid for their marketing spend and proportional overhead costs. You should look to scale and potentially further optimize these opportunities such that their impact gets amplified within your marketing actions.
2. EBITDA negative, but positive marketing contribution cohorts: Because these campaigns are generating revenue and have already paid for their marketing costs, you should look to optimize them further to eventually have them breakeven at the EBITDA contribution level. A few basic optimizations would include visual copy testing, demographics targeting, and altering payment conditions with publishers. If you cannot get these campaigns to eventual EBITDA profitability, you should consider reallocating budget towards more profitable campaigns.
3. EBITDA negative and negative marketing contribution cohorts: These cohorts are unlikely to pay for their own marketing cost, and even less likely to become profitable. Unless you have unreasonable means to fundamentally change the nature of these marketing campaigns, you are better off shutting them off and allocating budget across other opportunities.

The reason I'm such a vocal supporter of this methodology is because the competitive landscape constantly evolves around your business. An ongoing scrutiny of acquisition efforts allows you to respond to shifts in your marketplace so as to allocate marketing budget more efficiently.

Prioritize effort by value

When you treat cohort results against a unified view, it forces your marketing team to allocate budget and time resources to those activities that generate the highest ROI. Your ability to prioritize effort is a function of:

1. Available budget resources
2. Available time resources
3. Available knowledge & skill-set resources

While it's up to you to hire the right people with the appropriate skill-sets (#3), this methodology will force you to distinguish relative value upside between different marketing campaigns (#1). From this you will be able to allocate your highly constrained time resources towards a strategy that will iteratively scale your marketing efforts (#2).