Podcast Summary: Perpetual Traffic – (Part 1) Why ROAS Sucks: The New Marketing Metric Everyone Should Use…But Aren’t

Title: Perpetual Traffic
Episode: (Part 1) Why ROAS Sucks: The New Marketing Metric Everyone Should Use…But Aren’t
Hosts: Ralph Burns and John Moran
Release Date: March 18, 2025

1. Introduction to the Episode

In this pivotal episode of Perpetual Traffic, hosts Ralph Burns and John Moran delve into the shortcomings of the traditional Return on Ad Spend (ROAS) metric. They argue that while ROAS has been a staple in measuring advertising effectiveness, it no longer serves as the most reliable indicator of a business's growth and success in today's complex digital marketing landscape.

2. The Limitations of ROAS

Ralph Burns begins by highlighting the historical reliance on ROAS:

[03:59] Ralph Burns: "We used to look at ROAS or CPL as our number one metric to determine success inside the platforms... We now use ROAS as a secondary metric."

Ralph emphasizes that ROAS, once the primary measure of advertising success, has become inadequate due to the evolving nature of customer behavior and digital platforms. He points out that modern marketing requires a more holistic approach to truly capture a business's performance.

John Moran echoes this sentiment, pointing out that ROAS often fails to account for the multi-touch, multi-device customer journeys prevalent today:

[17:09] John Moran: "We have been using ROAS for at least 10 years, but it hasn't kept up with the changes in attribution and multi-device usage."

3. Introducing New Metrics: Media Efficiency Ratio (MER)

To address the shortcomings of ROAS, John Moran introduces the concept of the Media Efficiency Ratio (MER):

[27:28] John Moran: "Instead of chasing higher ROAS, we focus on our MER, which looks at new customer acquisition cost versus lifetime value."

MER provides a more comprehensive view by evaluating how efficiently marketing spend translates into new customer acquisition and long-term profitability, rather than just immediate returns.

Kassim, co-host and experienced marketing strategist, further explains the practical implications of adopting MER over ROAS:

[29:05] Kassim: "If ROAS was important, why don't I stop all of my ad spend except for your brand name?"

This analogy underscores the limitations of ROAS in driving sustainable business growth and highlights the need for metrics that align more closely with business objectives.

4. Case Studies and Practical Examples

The hosts present real-world scenarios to illustrate the pitfalls of relying solely on ROAS:

Example 1: A lifestyle brand experienced a 49.8% revenue growth year-over-year after reducing unattributed traffic by 90% and uncovering hidden revenue streams. This success was attributed to the accurate data and holistic approach provided by the Tier 11 data suite, rather than traditional ROAS-focused strategies.

Example 2: Kassim shares a turning point where focusing on ROAS led to misinterpretations of campaign effectiveness:

[34:35] Kassim: "We reported an 80% drop in conversions and a 12% revenue loss due to misaligned ROAS measurements. However, our top-line revenue actually increased by 32%."

This example illustrates how a deeper analysis beyond ROAS can reveal true business growth, even when platform metrics suggest otherwise.

5. The Shift from Channel-Centric to Client-Centric Strategies

Both hosts advocate for a client-centric approach over the traditional channel-centric model. They argue that agencies often focus narrowly on individual platform metrics, neglecting the broader business impact.

[16:52] Kassim: "Measurement has not progressed with real life. We've been using ROAS for the last decade, but it doesn't reflect the multi-channel reality of today's marketing."

John Moran emphasizes the importance of understanding the client's entire business narrative and aligning marketing strategies with overarching business goals:

[35:10] John Moran: "If a client leaves, it's our fault. We need to take ownership and ensure our metrics align with their business health."

6. Overcoming Attribution Challenges

The episode addresses the complexities of modern attribution, where customers interact with multiple devices and platforms before making a purchase. Traditional ROAS fails to capture these intricate paths.

Kassim discusses the evolution of attribution:

[17:09] Kassim: "Social media and multiple device usage have diluted attribution, making ROAS an archaic metric that doesn't account for the true customer journey."

To combat this, the hosts recommend incorporating advanced attribution models that consider multi-touchpoints and cross-device interactions, ensuring a more accurate representation of marketing effectiveness.

7. Tactical Adjustments and Scaling Strategies

In a detailed case study, Kassim explains how restructuring ad campaigns based on MER can lead to significant business growth:

[36:32] Kassim: "We shifted from performance max to standard shopping campaigns, focusing more on high-performing products. This led to a 32% increase in revenue with only a 3.93 MER."

This tactical shift illustrates how focusing on top-line business metrics rather than granular platform metrics can drive sustainable growth and improve overall media efficiency.

8. Conclusion: Embracing a New Metric for Growth

Ralph Burns concludes the episode by reiterating the importance of adopting metrics that align with business growth rather than platform-specific success:

[34:35] Kazsim: "The only thing that matters is your bank account. It's the source of truth."

By moving beyond ROAS and embracing comprehensive metrics like MER, businesses can achieve more accurate insights into their marketing effectiveness and make informed decisions that drive long-term success.

Key Takeaways:

• ROAS Limitations: ROAS is no longer sufficient as the primary metric due to complex customer journeys and multi-device interactions.

• Adopting MER: Media Efficiency Ratio offers a more holistic view of marketing effectiveness by focusing on new customer acquisition and lifetime value.

• Client-Centric Approach: Agencies should prioritize aligning their strategies with the client's overall business goals rather than focusing solely on individual platform metrics.

• Advanced Attribution Models: Embracing multi-touch and cross-device attribution models is essential for accurate measurement in today's digital landscape.

• Tactical Restructuring: Practical adjustments in ad campaigns, guided by comprehensive metrics, can lead to significant revenue growth and improved media efficiency.

Notable Quotes:

• Ralph Burns [03:59]: "We used to look at ROAS or CPL as our number one metric to determine success inside the platforms... We now use ROAS as a secondary metric."

• John Moran [27:28]: "Instead of chasing higher ROAS, we focus on our MER, which looks at new customer acquisition cost versus lifetime value."

• Kassim [29:05]: "If ROAS was important, why don't I stop all of my ad spend except for your brand name?"

• Kassim [17:09]: "Social media and multiple device usage have diluted attribution, making ROAS an archaic metric that doesn't account for the true customer journey."

• John Moran [35:10]: "If a client leaves, it's our fault. We need to take ownership and ensure our metrics align with their business health."

This episode serves as a crucial call to action for marketers and agencies to reevaluate their reliance on traditional metrics like ROAS and adopt more comprehensive measures that truly reflect business growth and marketing effectiveness.