The ROAS Race: How Chasing One KPI Impacts a Brand Long Term

Being a marketer can sometimes feel like being the head chef at a restaurant. As chefs constantly try to find the right ingredients, marketers seek the optimal media mix. 

Sometimes, we follow an established recipe, while other times, we create something new. 

Eventually, an executive decision is made, and a North Star pursuit is born—a singular focus that will demonstrate what success looks like. From there, it is the job of a media buyer to ensure all media mixes drive toward that end goal. 

But what if I told you that pursuing that North Star may harm your brand in the long term? Below, you will find out how.

Advertising KPIs

When evaluating a marketing strategy, it’s important to have a clear focus or goal and consistently measure performance against that target. A great starting point are metrics like:

• Return on Ad Spend (ROAS) 
• Cost Per Acquisition (CPA)
• Cost Per Install (CPI) 
• Return on Investment (ROI)

Like being a head chef, our media consumption and user interactions are measured by their return on investment. If a weekly special entrée is consistently ordered, you know you have created a hit, and it might be time to make that special a mainstay on the menu. 

However, there can be a catch-22: not everyone comes to the restaurant for a single dish. They may visit your restaurant for the entire menu and ambience. 

Similarly, it is naive to think that all users purchase because of one channel in your marketing mix. You cannot evaluate all media using a single KPI. 

For instance, connected TV (CTV) is excellent for raising awareness but may not deliver the best ROAS compared to other channels. Nonetheless, it could be argued that owning a commercial break on the largest screen in the house is what drives users down your media mix funnel.

The good news is that both Meta and professors at the University of Oxford School of Business studied this and found that the right media mix can lift brand mindset by 50% or more.

Return on Ad Spend and the Media Mix

According to EMARKETER, global advertising spending will approach $900 billion USD (almost $675 billion USD in digital) in 2024, attracting many new entrants and innovations. 

Today’s marketers are met with many media channels and a growing increase in channel-specific options and formats to consider. Due to this conundrum, marketers often default to a few patterns:

1. If it worked last time, they run it again but move budgets into areas that drove the best ROAS.
2. They use the same media mix as before but cut the lowest-performing channel.
3. They default back to the “laws” of industry experts (e.g. search and social).
4. They implement a “test and learn” approach.

While these media mix approaches are based on logic, they are susceptible to costly errors and often omit potential long-term solutions because marketers resort to short-term sales mindsets.

Les Binet and Peter Field, known as the “godfathers of advertising effectiveness,” recommend a 60:40 split favouring brand building (long-term mindset metrics) over performance marketing (short-term sales). They also advocate for broad-reach strategies to make the brand highly noticeable and easily recalled by consumers.

For instance, Airbnb’s CEO, Brian Chesky, and CFO, Dave Stephenson, credit a shift from only lower-funnel KPIs to brand building over two years for their most profitable fourth quarter in 2022.

The Solution: Branding + ROAS

There may not be a perfect answer for your media mix, but a potential solution exists. When planning Integrated Marketing Communications (IMC), focus on the specific actions you want users to take.

For example, if you’re launching a new shoe, you must address branding (to build intent) and purchases (to achieve return on ad spend).

This means you have two sub-processes in your IMC. The goal of IMC is for all channels to work together, compensating for each other’s weaknesses, as no single channel can achieve all objectives alone.

Here’s a simplified example of what this media mix would look like:

• Intent/Branding: Use channels like linear TV, CTV, video, audio, display, and native ads to drive brand intent. Measure these based on reach and frequency, following Binet and Field’s recommendation of allocating 60% of the budget.
• ROAS: Use channels like search, social media, and other high-performing, lower-funnel, conversion-driving media. This follows Binet and Field’s advice to allocate 40% of the budget to these channels.

In 2022, Meta conducted a study to understand the impact of branding on long-term ROI. The study found that the total ROI across all media channels, when including long-term effects, is 2.5 times higher than the short-term ROI. This translates to a 60% boost in long-term ROI for most major industries.

The challenge for marketers is to balance the need for short-term ROI with the importance of maintaining long-term ROI.

Enhance Your Media Mix With Programmatic

The average campaign could be 2.5x more effective with a different spending allocation. Marketers must use IMC to process their media mix into two buckets. 

If pulled too close to the ROAS conundrum, you will slash your media mix for short-term gain but risk the long-term ROI.

The bottom line is this: there is “no silver bullet” channel that will drive success but a media mix that will ensure long-term success. 

Consider these four factors for all marketing campaigns:

1. Complementarity and Integration

Ensure your media mix includes both branding and lower-funnel purchase plans.

With StackAdapt, you can seamlessly integrate with other channels to enhance overall campaign effectiveness.

2. Customization and Real-Time Optimization

Use IMC to measure campaign success and be prepared to reallocate the budget based on short- and long-term performance.

StackAdapt allows real-time optimization and customization of the media mix based on performance data, ensuring the best results.

3. Data-Driven Approach

Rely on data and continuous learning to guide your decisions.

StackAdapt’s platform is data driven, enabling you to make informed decisions and dynamically adjust your campaigns to meet your brand’s goals.

4. Flexibility and Innovation

Use channel testing, A/B testing, and continuous improvement to achieve long-term results.

Programmatic advertising offers the flexibility to test various digital channels and innovate, staying ahead of market trends and consumer behaviour shifts.

Get started with programmatic today with StackAdapt. Request a demo to find out how.