How we measure campaigns (and why it’s not ROAS)

Are we being too narrow-minded when it comes to your marketing campaign strategy and calculating your ROAS, your return on ad spend? Well, today I’m going to challenge your approach to measuring your marketing ROAS and introduce you to a new metric that I want you to consider. It’s your MER. What’s your MER? I’m going to explain on today’s podcast.

Hi, my name is Jordan McFadyen, and welcome to the Marketing Mindset podcast. Well, this podcast is designed to challenge both you and me to reassess our marketing strategies and come up with new thoughts and ideas to move away from random acts of marketing, and start to help you build a long-term marketing strategy for your business.

And today I want to discuss ROAS, return on ad spend. And I want to discuss how marketing teams and leadership teams and business owners, how we focus on it far too much. And it makes sense when you think about it as well, because ROAS and spending on campaigns on Facebook and LinkedIn, it’s literally direct spend that we want to think, as business owners and as marketing leaders, that we’re going to get that back. But that’s not always the case. And focusing on a single attribution channel could actually stifle your business growth, as it may not be showing you the full picture. And here’s why.

When we have a look at a complete ROAS mindset, a return on ad spend mindset, it’s leading to short-term thinking, and it’s leading to neglect of certain long-term strategies. What happens is if you’re focusing just on your return on ad spend, you tend to then prioritise tactics and campaigns with immediate impact on your revenue. And that can then lead to things like discount tactics or aggressive sales copy, and that may not then fit your company values or your company tone of voice. And what you could end up doing then is actually compromising your brand equity, compromising your customer loyalty, just to hit that higher return on ad spend, that higher ROAS.

And a ROAS is not showing you this complete picture, because we may, and often do, actually miss important nuances in customer behaviour or campaign performance when we just focus on that ROAS. And an unhealthy focus on ROAS can actually lead to inefficient spending. If us as marketers, if we’re prioritising channels that have a high ROAS, a high return on ad spend, even if they’re not the best channels for reaching our target audience, then that could be a problem.

And the one I want to focus on today is the big one: that ROAS metric, and how it doesn’t always take into account the impact of the other marketing efforts that may have contributed to that sale or to that conversion. And what this can do is this can lead to an inaccurate understanding of what is actually driving your business growth. And again, that’s a bit of a problem.

And at the end of the day, when we’re doing our maths for your marketing, it’s all changing, and it’s constantly changing. Even the way that we attribute a sale is changing. So what I think we need to do is that our thinking has to change also. Here’s a bit of an example. Data tracking, privacy. This is highly regulated. This has been in the news for a long time. Let’s even look at Apple as a bit of an example.

So Apple released iOS, their operating system, 14.5. And within that release, they introduced App Tracking Transparency, ATT. And what this meant is this required users and apps, and still does now, to actually ask for permission before tracking their data across apps and websites. And this still happens. Obviously, when you download a new app off the App Store, off your iPhone, it’s going to ask whether you want to be tracked. And this means that advertisers can no longer rely on those third-party cookies to actually track user behaviour, and it makes it much more challenging to measure that return on ad spend, or the ROI of those digital advertising campaigns.

And then Apple did it all again with the release of Apple iOS 15. Not necessarily more to do with your campaigns, but more to do with email privacy. And it just shows that privacy and tracking has changed. Of course, Apple introduced a new email privacy protection, which prevents email senders from using those invisible pixels to actually track whether or not a user has actually opened and interacted with a certain email. And what this can actually do over time is this is going to lead to imprecise data. It’s going to lead to poorly optimised ads and campaigns, which is essentially going to lead to a bit of waste of cash and a lack of marketing focus.

So what I’m saying is we need to be starting to have a look at the macro with your attribution channels, and not the micro on a single channel attribution, and measuring the return on ad spend on that single channel attribution. So this is how I would personally fix this, and an example of how you can actually use it with your business as well. And I’m going to introduce you to this term: your MER, your marketing efficiency ratio.

So what is this? Essentially, it’s a pretty simple metric. You’re going to have a look at your total revenue divided by the total overall marketing spend and the time spent across all the different channels. So the big difference there is it’s not single channel attribution, but we’re having a look at multi-channel. We’re not saying how much are we putting into a Facebook campaign and how much are we getting out of that Facebook campaign. It’s more having a look at what are we putting into our marketing spend this month, and what revenue were we able to get out of it.

So here’s a bit of an example of how it could have worked in your business, just to explain this a little bit easier. So let’s say you’re promoting your service-based business, and you’ve decided that LinkedIn, that’s where your audience is, and that’s where your product and service has a really good natural fit. And you’ve got a $10K budget. You’re spending $10K over the month on LinkedIn.

So here’s an example of how that attribution can actually look. Let’s say your prospect is scrolling LinkedIn. They see your ad. They like what you see, and they take interest. They’re like, oh, I like this company. This seems to be able to solve a problem that I’m currently facing. And what they do is they open up a new tab. They’re intrigued. They go to Google. They Google your brand name. They land on your website. Have a bit of a look through your website. They start to see your business does. It solves that problem that they’re facing. They’re impressed. But then they get distracted by a client call, or just day-to-day stuff. They close the browser and they head off. So that’s the end of that little journey.

But in the meantime, your Facebook pixel, what that’s done is that’s noticed that that user has been on your website, and it adds them to your remarketing campaign on Facebook once they’ve actually left your site. And so what happens then is a week or two later, Facebook serves them one of the ads that you have running on there. It’s a testimonial ad, let’s say. It’s talking about a fantastic experience that a client has had with your product or service. And that convinces that prospect then that you are that right company to help solve that problem that they were facing. So they contact your company via that Facebook lead campaign that you’ve built, and they turn into a client. It’s a conversion. Well done. We’ve got a new client on the books. Epic. The marketing’s working.

But what’s the issue here? The issue is that if we were focusing on return on ad spend, if we have a look at that, Facebook’s going to appear to have done all the legwork there, because Facebook got the lead after all. And if you have a look at Facebook stats, it’s going to say that Facebook got the conversion. But here’s when it starts to go downhill. Because as we know, your Facebook return on ad spend is failing to have a look at all those other touch points that the user had to make to get them closer to making that sale at the end of the day, and to turn into a client, or turn into a conversion.

So if you were going to focus on your return on ad spend, you’d probably have a look and say you’d cut your LinkedIn spend because it’s not converting. You’d probably then have a look and you wouldn’t prioritise your organic Google strategy, as customers weren’t finding you on Google anymore. And what you’d probably do is you’d probably go to Facebook and you’d have a look there, and you’d say, man, we’re going all in on Facebook, that is where our customers are. But what you’re doing in that process is you’re failing to remember that if you didn’t have the LinkedIn campaign or the Google search strategy in place, then you wouldn’t have even had an audience to remarket to in the first place on Facebook.

So let’s go back. LinkedIn was that discovery medium in the first place of this example. And then Google showed that that prospect had high intent and helped them make that decision. It kind of warmed them up. Facebook was simply remarketing to this highly engaged, high-intent prospect.

And just remember, that was just one of the many different examples of a client journey. There’s so many different other things that they could have done. So many other touch points that us as marketers need to consider. How about if they’d clicked through to your brand page on your LinkedIn? Maybe they did a search of some of the employees, and they’re really impressed by some of the qualities and the skills that they had. How about if a user saw one of your brand’s remarketing display campaigns across Google when they were searching their favourite news site, or another one of their websites for work?

If maybe they’d signed up for your newsletter, they read some of your email content, that helped them to get trust with your brand and with your business. Maybe they found and got value off an Instagram post that then directed them to your blog, and helped warm them up to the idea of actually working with you in the first place. If you’d focused on your single channel attribution, we could have, and often do, missed all that other data, because as regulations get more and more strict, we need to always change our focus on single channel ROAS. And instead, we need to start having a look at the bigger picture.

It’s time for us really to focus on the macro instead of the micro. And that really does start by introducing a bit of an MER metric, marketing efficiency ratio metric, into your marketing strategy, and then building that strategy, fine-tuning our tracking, and changing the way that we’re reporting the results to the rest of our team, so that it really does all align across multiple channels, with content that’s focused on that core problem that you solve, directed to your core audience.

So what I’m saying is your marketing strategy needs to become an omni-channel network that encompasses everything as part of that customer journey: the discovery, the nurturing, the awareness, the retargeting, and finally, of course, selling to your customers as well. And your reporting and your success metrics, they need to factor all of that in.

So if you’ve found this podcast helpful and it’s got you thinking, I really would appreciate if you can help us out by leaving a review or star rating on this podcast, or following the podcast for more discussions on marketing and how we can help with your business as well. And look, if you’re stuck, you want to chat through your MER strategy, you can find all our podcasts, all our resources on our website, and details also on how you can actually chat with me or the rest of the team on incorporating a multi-attribution strategy within your business or organisation, on our website at donebynine.com.

Thank you so much for joining us here on another episode of the Marketing Mindset podcast, and we’ll see you on the next one.