Google “ROI vs. ROAS,” and you’ll quickly find yourself either drowning in definitions–many of which are incorrect–or dragged into the futile argument that one metric is superior to the other–when both metrics are useful (in different ways).
Most marketing articles and blog posts focus too much on the metrics and not enough time talking about the business context in which they might be used. Take this article from advertising giant Google, as an example.
The article goes into great detail defining ROI and CPA, but then ends with this:
“Your CPA shouldn’t exceed the profit you made from each acquisition.”
You might be scratching your head right now thinking, “What’s wrong with this statement? I agree with Google.”
Look, I’d like acquire new customers at a cost less than the gross profit earned from a single sale too, but for Google to make such a blanket statement is more than short-sighted, it’s just plain dumb.
I know plenty of highly successful and incredibly profitable companies that are absolutely willing to give up more than the gross profit of sale number one in order to acquire a new customer. And anyone that claims doing so is stupid needs to have their head examined.
When you’re playing around with marketing metrics, you have to make sure you keep the business context front and center. It doesn’t matter whether we’re talking about ROA, ROAS, ROI, ROMI, CPA, or some other newly concocted metric.
About The Author: Ben Landers is the President and CEO of Blue Corona, a data-driven, inbound internet marketing company. Submit an inquiry to book Ben to speak at your next conference or event.
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