ROAS vs. Profitable Customer Acquisition
In advertising, there's a lot of focus on improving your return on ad spend (or ROAS), and while ROAS can be a good indicator at times, it's not the end-all-be-all that many people make it out to be.
In fact, using ROAS as your primary and only KPI (key performance indicator) could drive your business straight into the ground.
But if maximizing ROAS isn't our goal, then how do we perfect our customer acquisition strategy at Sunlight Digital?
Here's our secret: We spend MORE per customer acquisition, not less.
Keep reading for an explanation.
When ROAS Should Be The Main Success Metric
If your business comprises only one product or service that a client will only buy once in their lifetime, then ROAS will be a crucial metric for your growth marketing strategy.
But what if you have multiple products? Or if you have a business where your customers buy from you repeatedly?
Then you need to look at metrics outside of ROAS to ensure your social media campaigns are successful.
Customer Acquisition Strategy Without ROAS
If you have a business where people can buy more than one product or more than one time, you want to start taking other KPIs into consideration.
For instance, do you know the lifetime value of your clients?
If you sell a product for $30 and your average customer purchases 6 times more in a year, then the average annual value for that customer is $180.
In a simple example like that, you might want to consider spending more upfront to acquire a customer.
Want to find out why it works so well? Watch this video and find out!