The vicious cycle of ROAS targets is killing your business
While many companies focus on return on ad spend (ROAS) as their primary KPI for search, columnist Andreas Reiffen believes that ROAS targets can often inhibit growth and new customer acquisition.
Your marketing team is hard at work tweaking ads and landing pages to drive efficiency and hit the targets set for them by the C-suite. And those targets are more than likely ROAS-related.
But, for two reasons, these ROAS targets are actually causing a lot of damage:
- ROAS usually doesn’t take incrementality into account, which incentivizes marketers to turn on retargeting or brand campaigns to meet their targets while hardly generating any tangible results.
- It sets incentives to sell more low-margin products to mainly existing customers because this type of second-class revenue is cheaper to get.
If, like most companies, you’re focused on growth and new customer acquisition, you need to ditch ROAS-based KPIs, come up with a new metric and include incrementality before it’s too late.