ROAS and Other Types of KPIs You Should Be Reviewing

Paid advertising, including pay-per-click (PPC), is a marketing channel that can be measured and reviewed more than any other. There are so many key performance indicators (KPIs) that can show just how effective a strategy has been in a relatively short space of time. Whereas search engine optimisation (SEO) can take months to see results, PPC can see very immediate returns, meaning it can be measured in granular detail.

One of the KPIs that people focus on the most is ROAS, which stands for return on ad spend. It refers to the amount of revenue that is earned for every pound spent on a campaign. It’s as simple as saying for every £1 spent on ads, £5 was made – it’s easy to see why it is such a focused performance indicator. ROAS is considered the primary metric for many e-commerce companies that run paid ads. So much so that many paid strategies are based around ROAS targets and actually influence important elements such as budgets, so naturally ROAS figures are something that business owners are keen to focus on.

The problem here is that ROAS only follows a single stream from clicking a paid ad to converting. For many customers, their journey to purchase is not always this simple. So if a marketing team were to look at their customer’s journey through the lens of ROAS, they’ll miss vital digital touchpoints which have contributed to the end conversion.

At Embryo, we judge our success on the metrics that matter to you, be it revenue, leads, or followers. We use a holistic reporting system to ensure you see the full picture and can understand how our paid and organic campaigns are positively effecting your business. To learn more, contact us today by phone at 0161 327 2635 or email [email protected]!

The Role ROAS Plays In The Customer Journey

With the rise of digital marketing, different stages of the buyer journey (Awareness> Interest> Consideration> Purchase) have become more complicated than ever. In particular, the interest and consider phases in the theory are increasingly becoming more erratic which means that the customer journey is anything but linear. This is why ROAS may be a limiting KPI to define your campaign success.

For example, last-click or first-click attribution models can disregard the role your paid ads have played in the success of a consumer conversion. We always recommend data-driven as an attribution model as it shares the value of your channel so it is reflected in your conversion data. This offers a deeper insight into how your ads work together to lead your users to convert.

However, it is crucial to ensure that if you have a multi-channel digital marketing strategy all your channels share the same attribution model so the conversion data is not duplicated and is accurate as possible.

Can Being Too Fixated On ROAS Harm Your Business?

Many people believe so.

Although we have established ROAS is an important metric we should take a holistic view and monitor a variety of metrics that contribute towards our successes. For example, ROAS does not take into account other crucial factors such as customer lifetime value (CLV), brand awareness and customer retention.

Customer Lifetime Value (CLV) & Customer Retention

Customer Lifetime Value allows you to maximize the value of every customer relationship. As a result of this, you are will be providing a better experience for customers which in turn keeps them, around for longer and helps encourage more revenue for a long period of time.

A campaign may be achieving a high ROAS but a low customer retention rate may not be as successful as a campaign that has a lower ROAS but a higher customer retention rate.

Keeping customers is a lot cheaper than acquiring new ones. That is the main idea behind customer retention, understanding why customers are leaving and identifying ways to keep them around longer.

Brand Awareness

It is imperative that you do not underestimate the power of brand awareness. ROAS massively focuses on short-term profitability rather than long-term brand building. Brand awareness campaigns are powerful as they can lead to an increase in lifetime value and a decrease in overall customer acquisition costs (CAC). Therefore contributing towards your overall growth as a business. Brand awareness campaigns naturally have lower ROAS as they are targeting cold customers new customers are often more expensive.

Additionally, there is a new feature now in GA4 that helps you target purely new customers. New customers are known for being more expensive but this is paid back for if you have a lifetime value of a customer.

The KPIs You Do Need To Be Looking At

There are various KPIs in both PPC and paid social which play a huge role in determining your paid ad success. While we agree that ROAS is important, we want this blog to discuss why success should be judged on plenty of relevant KPIs not just ROAS.

Below we have broken down other KPIs which are and how they can give us a clear indication of whether we are on the right path.

Click-through-rate (CTR)

Click Through Rate (CTR). CTR is the percentage of individuals viewing a web page who view and then click on a specific advertisement that appears on that page. CTR is an excellent measure of how successful an ad has been in capturing users’ attention.

CTR is a great indicator of how well you have targetted your ads and if knowing they have reached the right audience (high CTRs suggest you have reached a highly interested audience).

Especially for brand awareness ads such as Facebook ads, display ads or YouTube ads. The first interaction with a brand may not necessarily result in a conversion but it can plant the seed in the customer’s mind and create a relationship between the user and brand recall. This may lead them to then convert later on in their customer journey through direct or search for example.

Conversion rate (CR)

Conversion rate records the percentage of users who have completed a desired conversion action. The formula for CR dividing the number of conversions by the number of clicks on advertisement as a percentage. This is a good indicator of whether your marketing efforts are effective as CR analysis can show which channels are the best for promoting a particular product/service. This ultimately can help advertisers to determine the effectiveness of their copy and use it to guide strategic decisions.

ROAS Is Just One Type of KPI, Get in Touch to Learn More

There is no dispute that ROAS is a valuable metric. However, it is important we look at the bigger picture and insight into other key metrics as the ones we have mentioned above are crucial to understanding the value of your paid ads and your customer journey.

At Embryo, we always look at the bigger picture and know that fluffy performance indicators mean nothing if you don’t see material benefits to your revenue or online presence. Do you want to work with multi-award-winning PPC experts? Get in touch via email at [email protected] or call us on 0161 327 2635.