Why ROAS is Not a Useful Metric

More often than not, we engage with seasoned ecommerce professionals tasked with running print programs while simultaneously holding some measure of responsibility for Profit & Loss statements. And as such, they tend to look at performance metrics with a ROAS (Return on Ad Spend) lens instead of a more critical metric – Contribution Per Order (CPO). Why is that important, and why does ROAS lack adequate insight as a key metric? Let me explain.

While ROAS is an efficient measuring metric, it cannot assign health to a channel, making it a relatively useless tool. The reality is it could be hurting your business as a primary form of indicator. ROAS can’t tell you how much money you are making for every order received. As an example, a ROAS of 6x is more efficient than a ROAS of 5x, but that doesn’t mean you made more money (or any money). A ROAS of 6x on $10 did not make you more money than a ROAS of 5x on $10,000,000. The volume grew top-line demand, but it did not increase profits.

In contrast to ROAS, Contribution Per Order (CPO) brings in the magnitude of the campaign segment targeted (marketing cost and cost of goods). This metric will help with your payroll and to keep the lights on – in other words — adding top-line demand and bottom-line profits.
much more at: https://cohereone.com/why-roas-is-not-a-useful-metric/?utm_source=CohereOne+Master+List&utm_campaign=086051e36e-Are+Your+Sales+Down%3F+No+Wonder…_COPY_01&utm_medium=email&utm_term=0_d81250a2d7-086051e36e-138282877

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