Obsession with ROAS is creating bad marketers; here’s why
At the first sight of things, ROAS reportings of all these modern platforms might seem a gift. It is, only if used wisely.
ROAS or ‘Return On Ads Spent’ is a metric that was popularised after digital marketing started getting traction.
It is, nowadays, the yardstick to measure the performance of any campaigns.
Technically what it means is that after you start running any paid campaigns, you divide the total amount of ad money spent with the total amount of sales generated. For example, if you run an ad for Rs. 1000 which helped you sell 5 t-shirts worth Rs.500 each, that means your ROAS is (5*500)/1000 = 2.5.
But here’s the twist. Now everyone is so obsessed with ROAS that I am seeing many people running ads for literally half a day for a very minuscule amount and pausing the campaign saying that it doesn’t have enough ‘ROAS’.
Marketers are being one dimensional.
Here is why I think relying only on ROAS would be a disaster:
- Lack of Storytelling:
Imagine Steve Jobs coming up with iPhone and directly running ads on Facebook optimised for highest ROAS (following FB ad Gurus) and then seeing that his ROAS is below 1 and thus stopping the campaign and deciding iPhone is not a “Sellable” product.
It would have been a terrible idea right? Yes. Imagine running the famous 1984 storytelling/brand communication ad “1984 won’t be like 1984” on Facebook and calling it a bad ad since it doesn’t have a ‘Call to action’ to buy the product.
That’s the problem, you can’t focus on communicating the story of the brand. Heck, nowadays digital marketers don’t even have any clue what ‘storytelling’ is.
- No focus on Retention
Since digital marketers are often rewarded by the ROAS, all eyes are on getting a new sale because that’s the one which is going to pump up the ROAS at the instance. Energy spent on retaining a customer is only loosely considered, a beautiful metric such as ‘CLTV’ or customer lifetime value is often ignored.
- Short term vision
Now, most of the time and energy is spent on making an ad ‘Click Baity’. It’s not about thinking from a longer perspective. Results are tracked, measured and concluded withing days or weeks now, but a good strategical move could die at that phase which would’ve given you good results in the quarters to come.
What I am trying to say is that ROAS might be like sprinting, and it would be suitable for a quick campaign. But businesses are very rarely a sprint. It is a marathon. Use it wisely.
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