Prior to the era of digital marketing, brands looked at their results from an array of campaigns such as print, TV, direct mail, etc. in a broader sense. They looked at their overall marketing costs compared to their overall profit to gauge their success and guide their future marketing decisions. These tactics and media buying strategies led to famous quotes like John Wanamaker’s: “Half the money I spend on advertising is wasted; the trouble is I don't know which half.”
In recent years, through going digital, marketing has opened doors and provided insight and data to brands that before were unobtainable. Metrics such as reach, clicks, product views, and purchases were at the forefront, and more often than not, ROAS was the north star.
With the introduction of iOS 14.5 and 15 giving consumers the option to opt-out of tracking, this data has become muddled. While we were spoiled for a long time with comprehensive funnels that showed the relationship between your website visitors through to purchase, and dashboards that allowed us to break down specific results by the ad level, these privacy updates have made it nearly impossible. At best, we’re working with an incomplete dataset.
It is important to note that even at its heyday, this data alone was never 100%, especially when it came to attribution (just compare your reports from Facebook to Google Analytics to Shopify!), and it’s only gotten worse with the dreaded 72 hour delay marketers are now experiencing with Facebook.
These changes have left brands scrambling to make sense of their digital strategy, hastily shutting down campaigns, and cutting spending because they’ve watched their ROAS decrease week over week. The reality is that people are having a hard time adjusting, and an even harder time moving away from ROAS being their golden standard.
However, there are two things to note (these may vary from account to account, but it’s generally been what we’ve seen across the board):
- Facebook has been underreporting by as much as 50%
- Even if ROAS is decreasing, revenue has been flat/stable (see images below)
So how are brands meant to gauge their digital presence and paid strategy? By looking at their marketing performance holistically. The best way to do that is to use the Marketing Effectiveness Ratio (MER) or a blended ROAS to guide future marketing decisions.
MER is, at its core, what we already outlined above when we spoke to the pre-digital marketing era: your total revenue divided by your overall marketing costs. In essence, it’s really going back to the basics. You can consider it Marketing 101! Brands before the internet were still paying for advertising, and they weren’t analyzing or obsessing over link clicks or page views, they were looking at an overall profit to determine whether their campaigns were successful. The same argument can be made comparatively to obsessing over ROAS. Don’t get us wrong, ROAS is a useful metric, but if you’re making key strategic decisions based on hitting a 5x alone, you risk missing the bigger picture - especially when, again, we’re now working with delayed attribution and underreporting.
By focusing on MER as your main KPI, you’re actually switching your mindset to one of an overall, multi-channel strategy that looks at both paid and organic marketing. This approach also allows brands to grow more sustainably because they’re scaling and spending based on actual revenue and available profit. It actually forces them to observe overall costs and identify what they can afford to spend versus focusing on a single channel and that 5x ROAS goal.
... And what do other marketers have to say?