June 2021 - BAZAAR PROS

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Full transcript:

So you are selling online and you want to sell a lot more online, so that’s what we are here for, to help you sell a lot more online. If you’re not still selling online, unfortunately, this video will be not that helpful for you. Start selling first and then come back and watch these videos. And hopefully sell a lot more.

All right today we’re talking about ROAS Return On Ad Spend. This metric is considered very valuable and used all over the place to justify why you should hire an agency and see how your ads are doing.

Most agencies will use this as a metric to show you, hey, you spend $1 and you got $1.50 back on your ad. So your ROAS is great, you’re making money.

I think ROAS is misused quite a lot in our community. Marketing and advertising agencies are much more guilty than anybody else to use it incorrectly. And there are two reasons, it’s used incorrectly.

One, very simply, this is the way we like to show value. And it’s the easy way to show value.

Other it’s just easier to measure is available in most platforms. So they just use it for that reason.

So the fact that it’s easier to measure, I would not blame anybody for that because, hey, it’s just easier to measure. So we’ve got to measure something and ROAS is available.

So, OK, but the other idea that knowing that ROAS is not a complete metric and it’s kind of a risky metric to use and still using it, I think it’s not doing the right thing.

So let’s get into it.

Why ROAS is not a complete metric?

So the problem with ROAS is you spend $1 and you got $1.50 back, so you have a ROAS of one 50% or 1.5 x, whichever way you want to do this.

But here’s the problem…

What if your cost of goods or cost of goods plus shipping and everything included was actually 90 cents? Now what’s going on? You spend $1 and your cost of goods was $0.90. And you and you got the return of $1.50 for that.

So think about it, so your ROAS 1.5 x, every dollar you spend, you’re getting 1.5 back because you’re already spending $1. The first dollar is already gone. So it doesn’t matter. So you are actually getting $0.50 off.

So product, which cost you to make you getting $0.50 back, you’re losing money at one point. $0.5 is not good.

So the way to deal with that is you set a process, which keeps you profitable.

So if you do that, that in this example, will say, you know, my cost in $0.90. So I need to get it done of at least $0.90 on every sale, which means if I do get 1.9 x return, then, you know, at least I’m breaking even or if I get two extra hours of 3x, then I’m making some money.

That’s great. So that’s a great start.

But instead, there is more. If you hired a consulting team, you hired some marketing agency, they’re charging you something in addition to that spend. What about that?

That’s where I would like to introduce this new metric, which we use called ROMAS.

So we like to say, ask your agency to show you not the ROAS, but ROMAS (Return on Marketing and Ad Spend).

What is real return on marketing and ad spend. The idea here is when you run a campaign in which you spend $10,000 and additional $5,000 to that agency, then you should be considering all those $15,000 as part of your spend. And you should include in the way we do ROMAS. We include the cost of goods also in there. So the ROMAS of 1.5 truly means that you are making 50% profit.

So that’s simplifying it.

But basically the breakdown of ROMAS includes all the spend, your cost of goods, your agency spend, your consulting spend, your marketing spend, your ad spend, everything. And if romance is positive, is more than one, you’re guaranteed to be making money.

So I urge you guys, just don’t stop at ROAS. Calculate the ROMAS.

Unfortunately, ROMAS will not be available directly in any of the tools. It is something you’ll have to send up in a spreadsheet. You can get the ROAS in. And then you can add the cost of sale. And then add these other expenses and to calculate your ROMAS.

So once again, ask for ROMAS, not just ROAS. Otherwise you’re only making decisions based on half information and you might be losing money. And if you’re selling online or doesn’t matter, you’re selling online, offline. You never want to lose money. Right? no. 1 rule, don’t lose money while trying to do any business.

All right. That’s all I have. And as I like, as we say, this is all for information for you guys to help your business. And there is no cause we don’t teach any courses, etc., but we do this for our clients day in and day out. If you find this information useful, applies to your business, apply it and follow us to learn more. And if you need help in any of these areas, reach out. We’ll be happy to help you guys out and we will be calculating ROMAS, which means if you work with us, we will always be looking to show you overall return on your investment, including the money you will spend on agency like us.

Thank you.

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Full transcript:

So you’re selling online!

Requirement: that you are selling online.

Then watch this video, because I want to tell you a few things which people get confused on. It’ll help you sell more.

If you’re not selling online or just starting out. This is not going to be very helpful to you.

So let’s start.

So first metric, which I want to talk about is click through rate (CTR).

So what is CTR? Click through rate is at what percentage of people who actually have shown your ad actually click through it. So the problem with this metric are not necessarily the problem, the area where people get confused with click through rate is, if the click through rate is low they decide working on their landing page on a website.

But just think about it…

They have not clicked through, which means it doesn’t matter how much you improve your website, they don’t know what your website looks like.

So click through rate is a metric, which is a function of your ad, your ad copy. It is nothing to do with your website or wherever the landing pages. So if you want to click through rate to be higher, which means they are not engaging with your ad, you need to work on the copy, just work on the copy. So that’s a take away. CTR is lower work on the copy, work on the offer. What you are saying there on the ad itself is what is deciding CTR.

The other metric is (Cost per Mille) CPM.

It’s nothing to do with million. It’s actually cost per thousand impressions. What are impressions? where your Ad is shown by Facebook or Google or youtube? That is the impression. An opportunity for somebody to look at that ad and interact with is an impression. So CPM, CPM is other metric. People get all worked up on.

CPM is a function of your competition.

Who else is competing for the same audience and seasonality? Basically also because some season, depending on around thanksgiving, everybody’s putting ads out. So CPM will go high. So my take away there is don’t focus too much on CPM. It is what it is. It’s not costing the your cost is just because of the competition. So there’s not much you can do about CPM.

Let’s go to the next metric. Cost per click (CPC).

Now Cost per click is a little bit more complex metric because it’s a function of multiple things. It does include the copy. How good is your copy? Because basically, if your copy is good and Facebook has to show your ad to less people before they click, then your cost per click will be lower because it doesn’t matter how you’re paying. All ad platforms, end of the day, internally are charging you for CPM, which means how many times they have to display ad.

So one thing to improve is, your ad. It will probably increase and improve your cost per click. The other is actually your landing page as it will matter because all platforms like users to after clicking, have a good experience. So if your ad copy said something else, but when they end up on the page, it is completely unrelated or if you have a wrong link, they will leave immediately and none of the advertisers platforms like that because it’s a bad experience, which means people will not click enough on their ads and they don’t want that.

They want you to make a promise in your ad and fulfill that promise or go on and details of that promise for that.

So which means you won’t be penalized a bit if your copy on the landing page is not matching video ad. So to reduce to improve your cost per click, do work on your copy also of not only that, but also the learning on landing page.

Now the most important metric, if you’re selling online, is cost per acquisition (CPA).

So the decision could be what is an acquisition, in most cases. If you’re selling, then somebody buys your product, cost per acquisition (CPA) is something that you want to watch very, very carefully. And because that will determine what is your return on our spend. And that will be our other video. We talk about ROAS because ROAS is in itself an important, very important metric and it’s misunderstood. And I’m just kind of giving it away. But we don’t like ROAS. We prefer the other metric, which you cannot directly measure. But can be computed. We’ll talk about that. But today, let’s talk about cost per acquisition and finish that cost per acquisition metric cost per acquisition.

The one of the aspect of acquisition is what is an acquisition and when?

A user clicked and then they went on to buy the product that’s acquisition, but what if they clicked yesterday or the day before yesterday or the last month. And then they bought? Is that still attributed to that acquisition? That’s when the attribution model comes in.

So attribution model is basically the concept that when they click, for this conversion to happen which ad did they see? what was the window in which if they clicked and they still converted later? should it be attributed to what?

Now, the attribution model has something very interesting, you need to consider. It does not matter which platform, what attribution model you are using. If you are trying to optimize your ROAS, you want to optimize that for shortest possible application window. And when, I say this again, optimize all your return on ad spending for the shortest attribution window, but calculate your return on the longest attribution window.

The idea is this…

You cannot wait because attribution window for it is long 30 days. You cannot wait for 30 days. And that information is already passed. The return, the conversion, which is happening for something which was clicked 30 days ago. There’s only so much you can do about it. So you’ve got to look at shorter window of 24 hours and how they’re interacting based on that change.

Your Ad spend should be decided on a shorter window, but actual calculation of your ROAS should be done on the longer window.
Why? because that was return on your ad.

You ran an Ad and 14 days later, somebody came and bought that. It should be attributed to the Ad.

They’re done on your ads return should be calculated for the longest window, but the optimization should be done on the shortest window. So that is the takeaway.

Conclusion:

So click rate important. You know, just to summarize, important, but focus on that.
CPM? Just don’t worry too much about it, except if you feel that it’s very high because of seasonality, maybe you don’t want to do ads that time.
CPC? Is a function of your ad and the landing page
CPA? Keep average attribution window in mind that the customer acquisition is based on attribution window.

I will do a little video on attribution window because it’s a complex enough set the subject, which deserves its own video.

All right. And as I’ve said before, there is no cause to sign up. We don’t charge for any calls. The only reason I’m giving this information away. This is what we do for our clients. Hopefully you’ll find it useful and use it for your own business. And if you feel you need help with these ads and you need help with selling online more, you can reach out to us, and we’ll be happy to help you with that. That’s a selfish motive. Give away the information of how we work. And you can benefit. And if you feel overwhelmed and need help, reach out to us.

Thank you.

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