iROAS is becoming the metric that rules the roost

Big picture

Today, marketing budgets must prove that they have driven outcomes which support the main business goals and deliver recognisable value across the organisation. The metrics and methodology available to help marketers prove this value and gain deeper insight into consumers are ever-evolving, with a focus in recent years towards proven incremental revenue.

Why it matters

With the threat of a challenging economic climate, leading to greater scrutiny of budgets,a focus on efficiencies is now essential to prove how each marketing effort positively impacts the business. This requires marketers to demonstrate actual commercial outcomes, rather than reporting on traditional marketing metrics. As a result, savvy marketers are driving their businesses away from traditional Return on Ad Spend (ROAS) and towards incremental Return on Ad Spend (iROAS).

Deeper dive

Finding a single metric to give you a complete picture of your performance is a struggle, but some get you much closer than others.

While having information about campaign deliverability or the chance your ads had of being seen is useful, knowing how your advertising generates revenue for your business is much more powerful and valuable. That’s why proving Return on Ad Spend (ROAS) has become an important metric across all marketing not just direct response although difficult to do well across all channels. Econometric studies and additional analysis have helped brands to better understand the ROAS value of each channel or campaign, influencing where best to spend in future.

But while ROAS has proven to be a useful success metric for years, there is a better way. Marketers can take things one step further by adopting iROAS. Moving beyond ROAS by taking incrementality into account and giving deeper insights into the performance of each channel. The higher a campaign’s iROAS, the more effective it is in driving growth. But a lower iROAS could indicate that other factors are responsible for growth, such as customer loyalty, requiring the campaign to be reassessed or money moved into more an effective strategy. By directly measuring how any given marketing effort impacts revenue and giving insight into other factor at play iROAS allows for more informed marketing decisions to be made across the board. Not only is it becoming the key metric, it’s the metric your CFO will love.

In a nutshell

When measuring performance, you need actionable metrics that prove outcomes, not vanity metrics that look good but lack commercial impact. ROAS is great, but iROAS is increasingly essential as accountability and profitability become more important. It is complex to measure, so having the right technology and partner to deliver this is critical.

Want to ensure you’re adopting the right metrics that bolster your marketing efforts? Then download our Guide to Bulls**t Metrics to help you choose those that support your business in the right way.