Efficient Ways to Measure ROI and ROAS
Even if you don’t know any other acronyms, you’re probably aware of ROI and ROAS because they’re two of the biggest. Return on investment and return on ad spend. However, the issue with both metrics is that they have always been difficult to measure. Even in a world where data is ubiquitous, ROI and ROAS present different challenges to other, simpler metrics.
Importance of Measuring ROI
Before we look at some of the challenges that modern marketers are faced with, why should you worry about measuring ROI? In simple terms, this is the metric that determines the validity of your investment. How do you know if your investment has been worthwhile? The easiest way to answer the question is to look at the ROI metric — the definition of the metric is the return on everything you spend on an ad campaign, marketing strategy, or another area of marketing.
Are your ad campaigns generating a strong return or do you need to make some changes? If you’re not getting a good return on your investment, this suggests that something isn’t quite working.
Therefore, ROI offers opportunities to spend your future budget wisely. You can adjust your budget so that the best campaigns receive the larger percentage of the budget (this should prevent wasting money on campaigns that aren’t performing). Ultimately, the goal is to generate the biggest possible return from each of your marketing investments.
Elsewhere, paying attention to ROI also provides an insight into the behavior of consumers. Over time, you learn the best types of advertising to resonate with your audience.
Long story short, ROI is important because it provides insights into your audience and spending. However, one of the biggest challenges of generating these insights accurately is media attribution. How do you assign credit when it comes to conversions? Which ad campaigns play the biggest role in gaining conversions?
What’s more, browsers and advertising platforms alike seem intent on removing third-party cookies. While this is a positive step for the privacy of consumers, it takes away yet more data for advertisers. Currently, it’s thought that just under half of all Americans use a browser free from third-party cookies. Elsewhere, consumers of Apple devices are switching off tracking thanks to the latest iOS update.
As the access to these sources reduces, so too does our hopes of accurately measuring ROI. What’s the point in arguing about giving credit to conversions when you can’t even track the conversions in the first place? Every year, the number of marketers confident in measuring ROI drops a little further.
Here are some of the biggest challenges for marketers in 2022:
As consumers interact with more touchpoints, measurement grows more difficult. For example, a customer could interact with an email marketing campaign, social media campaign, YouTube video, blog post, and website before converting. Which is responsible for the conversion? As a customer yourself, you’ll know about all the different ways that you can interact with a brand (including different devices and platforms).
If you use a last-touch model, all the other touchpoints are ignored — the same is true for a first-touch model. Therefore, we’re forced into an attribution model that considers multiple touchpoints, but even this causes confusion and problems. Do you include touchpoints that people make on the way to purchase? Or have they already made their decision by then?
Data Management
Next, businesses are wearing handcuffs when it comes to data management. Not only do they want to comply with all regulations, but they also don’t want to succumb to an attack (something that would affect the reputation of the brand!). Even if you have enough data to calculate ROI and other important metrics, you might not have it all in the same place, and this causes more issues.
With so many touchpoints, you’re likely gathering data across several platforms. How do you organize all this data? What if departments are working in silos? What if data is difficult to access across the whole business?
If you’re to move forward at all, all stakeholders need to work from the same data. Often, this will require a centralized data management platform (more on this later!).
Privacy Changes
Finally, we’ve already alluded to the many regulations and standards by which marketing departments right across the country need to abide. If you need an example, just go back to the beginning of 2021. Apple revealed iOS 14.5 and the whole marketing department nearly caved in on itself. Thanks to new features, users of iOS devices could suddenly ask apps to stop tracking their activity. Among other things, it meant that conversion data went missing — one of the most important components of calculating ROAS and ROI.
If you use the SKAdNetwork, you’ll know that conversion and install data are available. Yet, the problem is that none of the data is linked to individuals. This year, Google will continue to experiment with FLoC (Federated Learning of Cohorts) where advertisers still get cohorts to target with ads even if they can’t individually identify members within the cohorts.
For now, the various new standards and privacy regulations are causing havoc for advertisers. If you’re struggling, Trapica is one of the best tools for insights in 2022. Even after the Apple update, it provides insights into campaign data. What’s more, it offers ad automation even through all the privacy updates.
Efficient Ways to Measure ROI and ROAS
Not being able to accurately calculate ROI and ROAS is like being told there’s one million dollars on a small island off the shore but not having a boat to get there. We’re going to provide you with a boat (figuratively) with some advice to measure ROI and ROAS this year.
This might sound simple, but a surprising number of advertisers we speak to aren’t aware of their prospects and customers — they’ve become so reliant on technology doing everything for them that they cannot identify their users. Use an AI audience discovery tool (Trapica has one!) to learn more about your audience, how they behave online, and what they expect from your brand.
The more you learn about your audience, the more opportunities you have to personalize messages and tailor your content to the people who need it the most. With personalized messaging, people appreciate your brand, and you’ll have credibility and authority.
We mentioned it earlier, but you’ll struggle to control all your data without a data management tool this year. If you’re tired of logging into several accounts just to gather some data, this solution will integrate all your different channels and bring everything into the same platforms. Now, you can log into the data management platform and learn all about your audience using one simple dashboard.
When selecting a data management platform, make sure that it integrates with all the tools that you use. As third-party data disappears, you’ll need to increase your reliance on first-party data. Consequently, it’s time that you get your act together and bring all the data together in one warehouse.
Once you bring your data into the same platform, you can generate insights once again. Rather than guesses, you’re back to data-driven, informed decisions (in other words, reliable decisions that will help you to surpass competitors!). As well as making better decisions, a data management tool will also save your business lots of time because everything is available on one platform rather than chasing data around the internet.
Next, we recommend building a predictive marketing solution so that you further take control of the marketing process and reduce your reliance on other tools. With predictive models, you can use your historical data to create growth strategies and decide where to spend your money in the coming months.
In case you haven’t seen, predictive models use historical data to predict the future (as well as you possibly can without a crystal ball!). Using the right data, you can forecast the lifetime value of customers and use this knowledge to distribute resources with purpose.
Engage with Customers
If you take anything from this article, let it be that the transition from third-party data to first-party data is well underway. Often, businesses scour the internet for the best ways to learn about users/clients. Without question, the easiest method is to ask them directly. Create a simple survey for customers to fill out about their lives and their preferences. Before long, you’ll have all the ammunition you need to resonate with them and market effectively. Where better to learn about customers than from customers? This knowledge is better than anything you may deduce from online sources.
With these tips, you can overcome the challenges that every single marketing team in the world faces right now — don’t think that you’re alone in this battle. You can finally measure ROI and ROAS accurately to make better decisions regarding ad campaigns and marketing strategies!
