Return on Ad Spend (ROAS) is a familiar metric within the digital marketing landscape, often employed to gauge the efficiency of marketing expenditure. However, for some marketers ROAS has become the singular metric that defines whether a campaign was truly a success.
NB: This is an article from Cendyn, one of our Expert Partners
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While ROAS does provide a valuable snapshot of how efficiently resources are being used, it doesn’t necessarily indicate the effectiveness of a campaign.
Maximizing ROAS while ignoring other metrics can lead to a marketing strategy that is overly focused on lower-funnel tactics at the expense of other audiences. By consolidating this budget, marketers can inadvertently end up missing out on potential customers who are still in the awareness or consideration phases of the buyer’s journey. Additionally, focusing only on those who are most likely to book can limit the overall reach and potential growth of your hotel.
Moreover, an obsession with achieving a high ROAS can also mean overlooking opportunities for incremental revenue growth. This is due to narrowing the focus predominantly on immediate returns, rather than creating sustainable growth strategies that consider the bigger picture.
When calculating ROAS for your campaigns, it’s critical to remember a few important factors:
- Marketing campaigns typically need a time period of 2-3 months to ramp up and complete the learning phase, during which time the algorithm is still optimizing for best performance.
- In the context of a multi-channel, full-funnel marketing program, aim for a ROAS of 10:1 to 12:1. This ensures a balanced approach, converting interested prospects into customers, while also reaching out to new audiences who may not yet be familiar with your hotel.
- The ultimate goal of any marketing program is to drive overall revenue. Consequently, a comprehensive measurement plan must include the total revenue generated by each marketing tactic. Revenue should be benchmarked and then monitored over time, which allows advertisers to measure the incremental revenue resulting from additional spend or shifts in marketing tactics. It’s not a one-and-done but rather a continuous effort that requires regular attention.
Looking beyond ROAS to measure true engagement
Cost Per Acquisition (CPA) is another vital metric marketers should look at to comprehend the holistic performance of campaigns and understand how different channels perform in comparison to each other. To calculate CPA, divide the total ad spend by the number of customers acquired.
Remember: Channel CPAs will differ, but it’s essential to understand how they all interact to track multi-channel performance holistically.
A more advanced measurement strategy involves understanding the lifetime value (LTV) of each guest. This provides a multifaceted measurement of the effectiveness of your marketing efforts. By integrating Customer Relationship Management (CRM) and digital marketing attribution, you can track each guest’s journey with your brand, fostering loyalty and generating future revenue through personalized retargeting and loyalty campaigns.
Remember: The higher the lifetime value of a customer, the lower the acquisition cost. While this is a long-term measurement plan, it can form a vital cornerstone in the era of a cookie-less world, offering a more sustainable and customer-centric approach to marketing effectiveness.
For hoteliers, it’s imperative to partner with an agency that can effectively differentiate revenue between various tactics, such as search and display. This type of reporting ensures accurate channel tracking, as well as helping to identify the most profitable strategies.
