Digital marketing has relied heavily on Return on Ad Spend (ROAS) as a primary metric and I believe that focusing solely on ROAS can limit our perspective on marketing success.
I'd like to introduce a new concept called ROAS Distribution.
This approach involves assessing the distribution of ROAS across different campaigns within the customer journey. It offers a more comprehensive understanding of marketing effectiveness than traditional, isolated campaign-level ROAS analysis.
Let me explain using an example:
Imagine three campaigns:
- Social Media Awareness Campaign (Low ROAS): Engaging content for brand awareness.
- Website Retargeting Campaign (High ROAS): Targeted ads to convert website visitors.
- Email Nurturing Campaign (Mid ROAS): Educational emails to engage leads.
Traditionally, focusing solely on each campaign's ROAS might lead us to conclude that the social media campaign is underperforming. However, ROAS Distribution considers the broader picture. The social media campaign, despite its lower ROAS, plays a crucial role in attracting potential customers at the initial stage of the funnel.
ROAS Distribution provides a holistic view of the customer journey, allowing marketers to understand how different campaigns contribute to overall success. It enables a more nuanced analysis, optimization, and strategic allocation of marketing resources.
Discovering Insights with ROAS Distribution Analysis:
- Identifying Bottlenecks: A sudden decrease in ROAS after a social media campaign may indicate an issue with website optimization, especially in the consideration stage. This insight guides targeted improvements.
- Optimizing Budget Allocation: If an email nurturing campaign (mid-ROAS) shows potential, allocating more resources to this stage can nurture more leads into high-converting retargeting campaigns.
- Fueling Experimentation: A low-ROAS social media campaign suggests a need for fresh creative or audience targeting strategies. Testing new approaches can significantly improve lead flow into the consideration stage, boosting overall sales.
Implementing ROAS Distribution:
- Unified Measurement Platform: Consolidating data from all campaigns into a single platform provides a holistic view for analysis.
- Funnel Stage Segmentation: Categorizing campaigns based on their role in the customer journey (awareness, consideration, conversion) allows for analyzing ROAS distribution within each segment.
- Data Visualization: Charts and graphs, like the included infographic, help visualize the distribution and identify trends easily.
Case Study: Increase website sales of a specific product line
Campaigns:
- Facebook Targeted Ads: Focused on women, 25-40, interested in home decor, and past website visitors.
- Google Shopping Ads: Targeted people actively searching for similar products.
- Email Promotion to Existing Customers: Targeted existing customers who expressed interest in the product category.
Results
ROAS Distribution
- Facebook Ads: 15.2%
- Google Shopping Ads: 31.7%
- Email Marketing: 53.1%
Conclusion?
The three marketing campaigns, run simultaneously over the same date range, demonstrated significantly different ROAS values. This highlights the importance of using multiple channels and tailored targeting strategies to reach different audience segments effectively.
Key findings:
- Email Outperforms: The email marketing campaign to existing customers had the highest ROAS (7:1) and contributed the most to the overall weighted NET ROAS. This emphasizes the value of nurturing existing customer relationships for cost-effective sales.
- Google Shopping Success: The Google Shopping ads also performed well (4.17:1 ROAS), indicating the effectiveness of targeting people actively searching for relevant products.
- Facebook's Lower ROAS: The Facebook targeted ads had the lowest ROAS (2:1). It might be necessary to refine the targeting or the ad messaging to improve performance on this channel.
Recommendations
- Increase Email Focus: Consider increasing the budget allocation for email marketing, given its exceptional performance.
- Optimize Facebook Strategy: Analyze the Facebook ads performance to identify areas for improvement in targeting or messaging.
- Track Over Time: Continue tracking ROAS across channels and over time to gauge long-term trends and make data-driven adjustments to your marketing strategy.
ROAS Distribution empowers marketers to see the bigger picture. By analyzing the distribution of ROAS across all campaigns, we can optimize the entire marketing funnel, not just individual campaigns. This revolutionary approach paves the way for smarter budget allocation, targeted experimentation, and ultimately, a maximized return on every marketing dollar invested.