NEWS AND VIEWS

ROAS! Are you still using it?
ROAS

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Come on guys, we all still love to chat about the account that gets us 10 ROAS, we all do it! But, I’m afraid to say that if that is the metric you still work too, then that ship sailed!

You need to work to a #MarketingEfficiencyRatio, #MER for short.
Put simply, the marketing efficiency ratio is total (not just immediate, but total) revenue divided by total ad spend from all marketing channels. MER allows you to take a step back, and look at the cumulative effects of your marketing efforts over time.

Of course, there are a ton of marketing metrics out there that companies like us use, and we need these to make decisions on our ads for testing purposes, Cost per thousand impressions (#cpm ), cost per conversion (#cpc ), and of course, return on ad spend (ROAS)and most marketers view ROAS as the holy grail!

The problem is, ROAS is misleading. And thanks to IOS and the soon-to-be end of #thirdpartycookies -party cookies, you think that you’re doing better than you actually are, or it’s making you think that your ads suck, even when they don’t!
A lot of advertisers love ROAS because it provides a snapshot of immediate returns from a #marketing campaign. It will even be the decision-maker for whether to scale an ad or not enabling the budget to be released. But the downside of relying exclusively on #roas to make key marketing decisions is that you may be missing the bigger picture.

Products and services have different margins for a start, so the ROAS you see in the platform can’t be accurate to the true business revenue. Marketing has to do more than generate profits in the short term.

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Facebook made it far too easy for an advertiser to win. Throw up an ad with some decent creative, a good hook and offer and win, win.

It’s not that easy anymore. A solid #marketingstrategy should build lasting value, and drive profits for months, and years to come.

The key here is to remember that marketing expenses should build your brand as an asset for the future. It may not matter if the customer buys from you today, or even several weeks from now. As long as the customer buys eventually, the ad has accomplished its purpose.

MER will become even more important as Google and Apple set up tracking restrictions for businesses, such as the removal of third-party cookies. These changes will make ROAS much more difficult to use than it already is since analysts will only be able to work with an incomplete data set. On the other hand, the MER’s approach to asset performance will help brands determine the overall impact of their advertising tactics, despite any holes in the data.

To conclude. ROAS is a useful metric, but it won’t give you a full, clear picture.” In contrast, MER will give you a more complete, long-range view of your marketing efforts, and help you to make key strategic decisions for your company or clients going forward.

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