Today we’re truly living in the golden age of eCommerce, where young brands can get instant visibility on social media and startups can quickly gain traction through influencer marketing. Brand’s online communities are living their best life and eCommerce leads have more tools at their fingertips than ever before.
Yet amid all this progress, there is a twinge of nostalgia for the simpler times when tracking sales from a paid campaign was straightforward. Remember when you could check your ad dashboard and see exactly how a sale was linked to a specific ad campaign?
Sigh. Those days are behind us. With new privacy policies, GA4, and changes to cookie consent laws, attributing sales has become more of a puzzle than a straightforward connection.
When attribution was simple, the focus had always been on performance, and metrics like Return on Ad Spend (ROAS) were a key metric of success. ROAS enabled you to see just how much you spent on the ad, and then how much it brought in.
And although having an understanding of your ad campaign’s ROAS is still significant to know as an eCommerce brand, it’s important to understand that relying on it solely, is inherently flawed.
In today’s advertising ecosystem, in order to measure the wider effect of the YouTube, Facebook and Demand Gen ads which now proliferate – a different approach is needed.
Where increased ad budgets once equated to improved ROAS, we now know that pouring in more money will almost certainly lead to diminishing returns.
Many brands are now turning to the Marketing Efficiency Ratio (MER) instead of ROAS – or indeed to support it. MER is seen as a more comprehensive metric for evaluating marketing performance. It is calculated by dividing total revenue by total marketing spend, providing an overall return on investment. Unlike ROAS, MER accounts for the effects of wider marketing activities, such as brand-building Facebook ads, awareness campaigns, and organic traffic – essentially, top-of-funnel activity.
But it’s other metrics like MER, Customer Lifetime Value (LTV), Average Order Value (AOV) and Conversion Rate (CVR) that we should also be concerned about (and indeed we have been, if you refer to our recent series on eCommerce levers).
Focusing solely on ROAS – or too narrowly on last-click conversions – will limit your growth potential.
Knowing your metrics is a step on the path to sustainable growth but it takes more than just knowing them to actually grow; you need to test, experiment and iterate the variables in your campaign.
That might involve diverting budget to top-of-funnel activities like social media and video ads to generate new demand and build brand affinity. How does it affect your MER? How does it affect your LTV?
Test it!
What about adjusting shipping costs or promotional offer thresholds? How does that affect your AOV? How does it change your conversion rate?
Test it!
But – and we’ll say it louder for the people at the back – if you’re making changes or allocating budgets in different areas, it is essential to firstly record your metrics before you start, secondly monitor the progress of those changes, and thirdly the impact it’s had. You’d be surprised at how many brands with large budgets don’t necessarily record and make changes off the back of tests.
By trying different reasoned tactics, you can better understand what works and what doesn’t, leading to more informed budget allocation and strategic decisions.
If you’re working with an agency, here are some questions you need to ask them:
At Space & Time, we recognise that your brand and its audience is totally different from the next, and through hypothesis-driven testing, incremental investment, iterative learning and transparent reporting, we are best placed to identify the most effective tactics to scale your eCommerce business.
Because we have been around for a while, that means our respective teams are steeped in experience, are clued up on the latest tech stacks, privacy updates and crucially have followed eCommerce from day one. This positions us to knowledgeably evaluate what drives your audience’s engagement, and make data-driven and experience-informed decisions to optimise those key metrics.
We’re certain our approach will accelerate your eCommerce brand’s growth faster than the inflation rate of our favourite childhood chocolate brand, Freddos.
This is the first article in our series, Redefining potential: Mastering growth through adaptation. It’s designed to empower you with the insights you need to get under the bonnet of your eCommerce metrics, and enable you to explore and test the key parameters that will drive your brand’s growth. If you’re interested in discovering how we can help you on this journey, why don’t you drop us a message?