Breaking it down Return on ad spend

Breaking it down

With Bree Coleman

There are so many ways to look at business right now. From the growth in e-commerce, to unwinding from COVID, we know it can be difficult to keep up with exactly what we’re looking for and measuring.

In that spirit, and trying to make doing business with us easier, each edition we will feature articles like this one, to simplify how we measure performance, and the different angles we believe we should all be looking at. Think topics such as inflation, digital growth, and customer profiles. The aim is to equip you with all the right information for constructive and productive conversations with our teams that lead to the best possible partnership outcomes. We’ve recently announced the launch of MixIn by Endeavour and for our first deep dive, in this edition we take a look at one of the most helpful metrics when it comes to evaluating advertising performance - Return on Ad Spend. Simplifying how suppliers engage with the MixIn platform was a major priority for us and the self service model enables users to jump in and download reports themselves. But while the ability is there, we’d really like you to also get the most out of the reports by breaking down exactly what they mean for your performance.

Bree Coleman, General Manager Merchandise Transformation

Let’s break it down: Return on ad spend

What is ROAS and how is it calculated?

Return on Ad Spend (ROAS) measures the amount of revenue generated from sales for each campaign you run. And, it’s an important key performance indicator (KPI) in online and offline marketing. To calculate ROAS, you divide the revenue generated by the ad spend. For example, if you spend $1000 on advertising and generate $2000 in sales, your ROAS would be 200%.

Why isn’t everyone using ROAS?

Customers, people like us, are hard to measure: think about out of home advertisements such as billboards for example - not all advertising channels make it easy to attribute the appearance of an ad to a transaction. Sometimes that billboard might change our mind about the product and encourage a sale, but the advertiser can’t easily link that sale to the billboard. The rise in popularity of Retail Media over the last couple of years has been, in part, due to the ease of comparing advertising investment to sales, especially through eCommerce channels. Marketers can approach marketing planning with a much greater degree of accountability and demonstrate to their businesses the contribution that advertising makes to sales.

What’s ‘good’ ROAS?

As a rule of thumb:

• Below 300% = Re-strategise • 400% - 500% = Decent

• 600%+ = Looking great but make sure that this is sustainable and scalable – read on to find out how to achieve this.

MixIn launched sponsored product placements on the Dan Murphy’s website at the end of October and early campaign results are looking outstanding for our suppliers. ROAS continues to trend upwards, with an average of +800% since launch. We’re currently running campaigns for over 1,200 products using these sponsored product placements and we’ll be rolling them out on BWS early in the new year.

How can you use ROAS?

Firstly, remember that ROAS isn’t about how much you spend; instead, it’s about the effectiveness of that spend. In the auctionbased environment of MixIn’s platform, suppliers set their own budget (called a bid) to give their product more prominence on a product listing page, paying for a click on the product, similar to Google search. The key to achieving a high, sustainable ROAS starts with:

• Advertising a wide portfolio of products: get your brand across multiple categories or demonstrate its depth in a chosen category. • Keeping a close eye on the conversion rates you see: too many clicks and not enough sales will quickly erode

ROAS. This could be a point to consider reducing bids and reinvesting in other areas such as display advertising, MixIn’s digital signage in Dan’s and BWS stores, etc. It might be that you need to create some more brand awareness or product consideration before consumers are ready to purchase. • Testing and learning: MixIn’s platform provides very detailed reporting.

For example, you could look at daily trends to see if there’s a sweet spot during the week at which you get higher conversion rates or sales volumes; consider reducing bids during lower times and focusing your budgets to capitalise on higher performing periods.

For more support

MixIn and Promote IQ will be hosting a training webinar for suppliers and their agencies on 16 December, 2022. Please contact steve.jones@edg.com.au for registration details.