The beginning of the year brings new excitement for marketers. Planning new campaigns, setting new goals, and reprioritizing projects to make the most of a clean slate. Yet, even at a time when change is expected, most teams don’t consider changing the metrics they use to track performance.
Of course, some metrics are necessary. Don’t fix what isn’t broken. But, how do we know what is or isn’t broken if we don’t at least take the time to inspect our reporting practices? In 2024, with record-breaking ad spend predicted, it makes sense to clearly define what success looks like for your marketing team and how your team tracks your daily efforts towards that success.
At the top of that list is Return on Ad Spend (ROAS). It’s the single metric that can tell teams whether their campaigns are effective. But that’s just one layer. ROAS can also tell you which channels are driving real business results, how your audience is changing, and more. How does one metric do all that? Thank you for asking. Having a ROAS strategy to measure marketing performance is key for 2024.
ROAS as your big picture performance metric
The most basic way to calculate ROAS is total revenue generated from paid advertising divided by the total spend for paid advertising. But, conversions don’t happen in a vacuum. Broad awareness campaigns, specific, location-based marketing, and other factors all contribute to a final sale. So, narrowing your focus on this simple understanding of ROAS misses how all your advertising efforts move customers towards their final purchase.
To be successful in 2024, marketers need to consider the way all the ad campaigns work together to generate revenue. Calculate big-picture ROAS by dividing total revenue by total ad spend. Zooming out in this way, making sure all ads are accounted for, means teams can see how efficient their efforts are. However, to optimize your advertising campaigns, you’ll need to go deeper into your reporting metrics. But keeping an updated big picture ROAS number at the top of the entire marketing teams’ minds ensures that you never veer too far off track.
ROAS to track new business and returning customers
Another critical factor for growing your business in 2024 is keeping a steady stream of repeat customers. Not only does it cost more to convert a new customer, but repeat customers also work as part of your marketing team for free. They can tell their community members about your restaurant, give your product to their colleagues, or spread the word to tourists looking for insider knowledge.
Marketers who track both ROAS on new business and ROAS on return customers are much more likely to focus on what’s working and maximize spending because they have a better understanding of what’s working and on who. Tactics like audience targeting, user tracking, and retargeting campaigns all help your team understand how much it costs to acquire new customers and what it costs to create a loyal customer. Spending a few months creating a base of repeat customers gives your team the freedom to optimize the campaigns that attract new customers. When both start working together, you start to see supercharged growth.
ROAS to understand each channel
The last way to measure ROAS to grow your business in 2024 is to calculate ROAS by channel. GroundTruth CEO, Brandon Rhoten, talks frequently about how marketing performance metrics all need to be understood in context. When you have a problem you’re looking to solve, like more sales in Q1 or a better positioning in the market, to accomplish that goal, different channels move the needle in different ways. As such, you need to look at your performance metrics, like ROAS, in the context of each channel and a comprehensive strategy.
When trying to optimize your advertising campaigns, or understand which channels are right for you, and which you should abandon, you need to calculate ROAS for each of those channels. Look at performance both in relation to each other, but also in terms of the long-term future of your business. If a channel, like Connected TV and Over-the-Top (CTV and OTT) for example, has a low ROAS right now but looks like it will be promising in the next 6 to 9 months, continuing investing in the channel right now might be best for long-term success.
The right ROAS strategy will vary depending on your goals and your resources. But the one thing that remains universal is that using ROAS as a way to understand the efficiency and long-term effectiveness of your ad campaigns is the right strategy for all marketers.
GroundTruth Can Help Improve ROAS with Unique Audiences Across All Channels
Start improving ROAS across channels with GroundTruth’s unique audiences. Through real-world behavior, we help companies maximize advertising dollars by ensuring the most motivated audiences see their message. Want to know more? Contact us today and we’ll show you how we can help turn your advertising into real business results.