It’s necessary to measure your e-commerce ad campaign’s success rate. Which is the first metric that comes to your mind with this? Surely, it is a return on ad spend, also referred to as ROAS. ROAS is a highly popular marketing buzzword and is considered the primary KPI helping you in growth marketing. But experienced marketers will tell you why it will be a huge mistake to rely on ROAS. Instead, there are other metrics you need to consider to find out about the right margin of profitability.

Though there is nothing wrong with considering ROAS as the appropriate metric, you cannot see the return on ad spend entirely dependent on the conversion value divided by ad budget. However, it is just a fragment of the problem. While considering marketing that is so much connected to growth marketing, you do not correctly serve your business well if it is related to ROAS.

In reality, one can measure the effectiveness of the paid ads by following three steps that will require you to focus on CLV in place of ROAS. This is important for bringing your business long-term success.

𝗪𝗵𝘆 𝗥𝗢𝗔𝗦 𝗜𝘀 𝗜𝗻𝗲𝗳𝗳𝗲𝗰𝘁𝗶𝘃𝗲 𝗶𝗻 𝗣𝗮𝗶𝗱 𝗔𝗱𝘀

First of all, you must understand why ROAS is not an effective metric for measuring the success of paid ads. However, this may be new to you, but it’s completely true. Moreover, paid ads will govern the success of your campaign as per their capacity into whether they are effective at attracting people to get in or to a page on your website.

Moreover, it is again a fact for any marketing or non-digital marketing campaign. The ads will only be a small piece of whether they can convert a sale. Also, your website plays a huge role in various purposes, such as:

• ⭐ Product sales
• ⭐ Brand promise
• ⭐ Social proof
• ⭐ Price point

You may have the best-paid ads strategies, but if you do not have a solidly designed e-commerce store globally, you will have a poor ROAS.

You only need to optimize your activities for something which controls 100% of your activities. Facebook’s growth hackers tell you a lot about it, but there will be many aspects. Make sure that you keep ROAS in mind for things you want, but judging your paid ads includes the CTR (click-through rate) and CPC (cost per click).

𝗣𝗮𝗿𝘁 𝗜 – 𝗥𝗢𝗔𝗦 𝗶𝘀 𝗝𝘂𝘀𝘁 𝗔 𝗣𝗶𝗲𝗰𝗲 𝗼𝗳 𝗔𝗻 𝗘𝗾𝘂𝗮𝘁𝗶𝗼𝗻 𝗳𝗼𝗿 𝗔𝗻 𝗘𝗰𝗼𝗺𝗺𝗲𝗿𝗰𝗲 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀.

The term “growth marketer” has been amply used in the past and been rather overused. Growth marketers are people offering you a wholesome strategy to drive long-term scalable business growth. Frequently, growth marketers may be the only media buyers who are hidden from you.

You may have great media buyers that can help you get an excellent CTR and CPC. Also, you can get up to 4 times the return on ad spends. This is something you cannot control. However, what media buyers lack is a logical approach for growth and planning the right strategy required for the same.

Various brands are completely focused on ROAS, specifically in new customer acquisition. However, suppose you’re looking at the bigger picture of long-standing and successful brands. In that case, you will understand that it’s not only valuable to acquire customers, but you must also need to maximize your relationships with customers post the sale.

Thinking big and broad is what will help you to develop customer relationships. You need to focus on earning a customer and not just a sale.

If you’re consistently getting a low ROAS on your paid advertising, remember, you need to be smart regarding how you will buy the ads. However, the fact is that you need to invest in acquiring customers, especially if you’re a new brand or a new business. Things won’t come right away.

You need to invest in getting high returns. Firstly, you have to spend amply to make your prospective customers aware about your brand and products. Secondly, you need to work on building trust for a younger brand and a highly competitive market. You need to build a business model where you can acquire a customer and make them your fan, someone who keeps returning to spread your brand’s message. This helps you get a healthy and effective branding strategy.

𝗡𝗼𝘄 𝗰𝗼𝗺𝗲𝘀 𝘁𝗵𝗲 𝗴𝗶𝘀𝘁. 𝗪𝗵𝗮𝘁 𝘀𝗵𝗼𝘂𝗹𝗱 𝗺𝗮𝗿𝗸𝗲𝘁𝗲𝗿𝘀 𝗳𝗼𝗰𝘂𝘀 𝗼𝗻?

It’s not unusual to find situations where a brand looks great with making new sales, but later, they won’t make any money.

Now, what holds the key?

Your primary focus needs to shift from ROAS to customer lifetime value (CLV). ROAS is an essential part of the customer’s lifetime value equation as the customer relationship begins with a sale. What’s more, is that it doesn’t stop there. So, you have to create a fan that keeps returning to purchase from you time and again (This is what increases CLV).

𝗪𝗵𝘆 𝗶𝘁’𝘀 𝗪𝗼𝗿𝘁𝗵𝘄𝗵𝗶𝗹𝗲

Experts say that it costs 5x to make sales to a new customer compared to your existing customers. Digital agencies mostly want to buy traffic from:

• ⭐ Facebook
• ⭐ Google
• ⭐ YouTube
• ⭐ And other ad networks.

It requires skill to implement the strategy nicely, but ROAs will only be a small part of the equation to have your series of sales in line.

A holistic approach is vital for a company to help brands make the most of their strategy. It’s necessary to build and grow your business using various parts to work together to achieve one primary goal. It’s essential to grow your CLV to scale your business healthily.

𝗣𝗮𝗿𝘁 𝗜𝗜 – 𝗧𝗮𝗰𝘁𝗶𝗰𝘀 𝘁𝗼 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗲 𝗖𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗟𝗶𝗳𝗲𝘁𝗶𝗺𝗲 𝗩𝗮𝗹𝘂𝗲 (𝗖𝗟𝗩)

Here are three steps to break down the tactics of increasing customer lifetime value (CLV).

𝟭. 𝗖𝗿𝗲𝗮𝘁𝗲 𝗔 𝗖𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗚𝗿𝗼𝘄𝘁𝗵 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆

You need the right strategy to have a reliable way to offer a good CLV. You must have your “formula” that gives your customers the right value to get a continuous profit from the customer. You need a plan to grow your customer’s lifetime value. It is not related to your marketing equation. It would help if you directly addressed the inner areas of your business model. It would be best if you were clear about certain aspects:

• ✔️ What would be your product line, and how would it look?
• ✔️ What are your plans to expand this product line?
• ✔️ Have you formed the right product margins to support your business? Which products have a higher margin than others?
• ✔️ Can you bundle products to get a higher average order value?
• ✔️ What work do you perform to develop your voice and brand story related to your customers’ stories?

𝟮. 𝗣𝗿𝗶𝗺𝗮𝗿𝘆 𝗠𝗲𝘁𝗿𝗶𝗰𝘀 𝗚𝗼𝗮𝗹𝘀

CLV is your primary metric here. Set a realistic goal for things you want to achieve with your customer’s lifetime value to grow it.

Next, set goals for other vital metrics, including:

• ✔️ ROAS
• ✔️ Average order value (AOV)
• ✔️ Cost per acquisition (CPA)
• ✔️ And conversion rate.

Though you need to comply with the benchmarks set by e-commerce exports, in the end, you need to have realistic goals for all the key metrics. You have to use a predetermined formula that you have created to make the most of your efforts.

For example,

If your customer lifetime value (CLV) is $100.

The average order value (AOV) is just $25.

You can look at the options you have.

You need to understand if you can spend $50 to acquire a new customer if you choose it. At this point, you can still make $50.

Though your ROAS looks timid, you indeed have a profitable business. Another aspect is accounting for profit when you get the $100 CLV.

𝟯. 𝗧𝗵𝗶𝗻𝗸 𝗕𝗶𝗴: 𝗛𝗼𝗹𝗶𝘀𝘁𝗶𝗰 𝗔𝗽𝗽𝗿𝗼𝗮𝗰𝗵

Implement a holistic marketing strategy based on key metrics, which requires you to set the right product strategy and goals, which requires experience and expertise in:

𝗧𝗿𝗮𝗳𝗳𝗶𝗰 𝗮𝗻𝗱 𝗖𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗔𝗰𝗾𝘂𝗶𝘀𝗶𝘁𝗶𝗼𝗻: This includes traffic from organic and paid Facebook, Google, and YouTube Ads.

𝗦𝗶𝘁𝗲 𝗢𝗽𝘁𝗶𝗺𝗶𝘇𝗮𝘁𝗶𝗼𝗻: You need high-level site navigation alongside improving conversion rate optimization and site design.

𝗖𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗠𝗮𝘅𝗶𝗺𝗶𝘇𝗮𝘁𝗶𝗼𝗻: It’s important to engage with customers by employing a:

• -Robust email marketing strategy
• -Loyalty programs
• -Customer service

It helps you to maximize value.

When you focus on isolated areas for growth, it gives quick wins but not sustained growth. For long-term growth and success, you need a broad vision and a holistic approach.

𝗜𝗻 𝘁𝗵𝗲 𝗘𝗻𝗱…

Remember that your business must focus on lifetime value to give you success, and a holistic business strategy if you’re mistakenly focusing on getting a 3-4x ROAS every month because every social media growth marketer was telling you this. But the customer lifetime value leads to long-term business growth.