Media as an Asset, Not a Liability
Here at Marketsmith, we view marketing as an asset, not a liability. It is an investment that should put money in your pocket; short- and long-term returns should be measurable and delivered – regardless of the changes in the landscape. Similar to any esteemed financial institution, Marketsmith manages your [marketing and media] assets with real-time reporting and analysis via a suite of technology and experienced advisors. This article builds upon the active conversation of ROI and ROAS, to explore how your marketing investment should be utilizing these growth metrics.
ROI vs ROAS: What’s the difference?
Return on Investment (ROI) is defined as your total return, inclusive of all client costs related to the business. This may include project/product margins, external costs, and media spend. ROI can be calculated differently for each brand, depending on the product, operation, and/or investment cost. Some brands may incorporate product margin into their ROI calculators, and some may exclude it, depending upon their operational activities. ROI may be expressed as a percentage, but does not need to be multiplied by 100.
ROI Formula:[ (Margin Dollars – Initial Investment (Media)) / Investment Cost ]
Return on Ad Spend (ROAS) measures media spend against revenue generated from that media spend. ROAS only looks at media spend, and does not account for operational costs from the client perspective. ROI could be viewed as profitability, while ROAS could be viewed as sales.
ROAS Formula: Conversion Value (Sales) / Investment
Measure Performance with ROI and ROAS Together
Understanding both ROI and ROAS before, during, and after campaigns is essential. Before partnership, it is important to understand how ROI will be measured, so that your full media investment is considered. Our teams would work together to formulate a learning agenda, modeled from historical data and future objectives. This learning agenda would act as a clear map for testing, measuring, and optimizing against your goals.
ROI in Real Time
During a campaign, you should be able to view ROI and ROAS in real time, as if you were viewing your stock portfolio or store inventory. We utilize Marketsmith IQ and custom-built CRMs to keep a running check on ROI and ROAS to ensure that media is optimized daily toward growth-driving segments.
Lastly, at the end of a campaign, it is essential to have a clear understanding of which segments are driving the most return. As campaigns progress, data-driven insights that provide actionable optimizations are key; this is only possible if ROI and ROAS are measured across each channel, each audience, and each creative rotation.
Examples of actionable insights:
- When targeting New Jersey-based millennial parents who drink coffee regularly, Hulu and other Connected TV channels drove a higher lift in awareness than linear TV.
- Creative that focused on product education drove more buy online and pickup in store sales, whereas paid social drove more delivery.
To set this up successfully, all you need is a formula and the data. Of course, it helps if you have Marketsmith’s seasoned media planners to help discover your brand’s ROI!