Perpetual Traffic Podcast Summary

Episode: (Part 2) Why ROAS Sucks: The New Marketing Metric Everyone Should Use…But Aren’t
Release Date: March 21, 2025
Hosts: Ralph Burns & Lauren E. Petrullo
Guest: John Moran
Produced by: Tier 11

Introduction

In the second installment of their two-part series titled "Why ROAS Sucks," hosts Ralph Burns and Lauren E. Petrullo delve deeper into the limitations of Return on Ad Spend (ROAS) as a primary marketing metric. Joined by John Moran, a seasoned marketing expert at Tier 11, the episode challenges conventional metrics and introduces a more effective alternative for measuring marketing success.

The Shortcomings of ROAS

Lauren E. Petrullo [02:52]:

"This is a super important episode… ROAS is a no longer a leading metric. There are better ways to measure the growth and scale of business online."

The discussion begins by highlighting how ROAS has become an outdated metric that no longer provides a comprehensive view of a business's marketing effectiveness. Despite its widespread use, ROAS fails to account for the broader aspects of customer acquisition and long-term profitability.

Introducing New Customer Acquisition Cost (NCAC)

John Moran [12:15]:

"ROAS is like an old metric. We should be focusing on Gross Profit or Net Operating Income instead."

John Moran introduces the concept of New Customer Acquisition Cost (NCAC) as a more insightful metric. Unlike ROAS, NCAC focuses on the cost associated with acquiring new customers, providing a clearer picture of marketing efficiency and business growth.

Optimizing Ad Spend Across Platforms

Lauren E. Petrullo [05:22]:

"Meta was non-targeted spend and non-excluded spend that just kept growing."

The hosts discuss the importance of diversifying ad spend across platforms like Meta (Facebook) and Google. They emphasize moving away from rigid ROAS-based strategies to a more flexible approach that targets profitable customer segments.

John Moran [08:46]:

"It's not about getting the highest ROAS on each individual platform; it's about driving the most profitable traffic to your business."

By restructuring ad campaigns to focus on high-margin products and excluding non-performing segments, businesses can achieve better scaling and profitability.

Case Studies and Real-World Examples

Lauren E. Petrullo [15:38]:

"Our blended CAC went from 91 down to 60. New customer ROAS went from an average of 1.2 to 1.35."

The episode presents a compelling case study where strategic changes in ad targeting led to significant improvements in Customer Acquisition Cost (CAC) and ROAS. By focusing on profitable products and excluding irrelevant audiences, the client saw a 40% decrease in CAC and an increase in new customer ROAS.

John Moran [20:13]:

"Our sales are up 353%, our profit is up 506%, and our blended CAC has decreased significantly."

Another example showcases how adjusting marketing strategies across channels can lead to exponential growth in sales and profitability while maintaining or even reducing acquisition costs.

Implementing an Omnichannel Strategy

Lauren E. Petrullo [07:21]:

"Scaling is using omnichannel… amplify the customer journey instead of fighting yourself with siloed platforms."

The hosts advocate for an omnichannel approach, where different marketing platforms work in harmony rather than in isolation. By using Meta for prospecting and Google for conversions, businesses can create a cohesive customer journey that enhances overall marketing effectiveness.

Measuring Business Health Over Channel Metrics

Lauren E. Petrullo [25:37]:

"Measure business health, never measure a report. If your business is failing, no report's going to tell you you're crazy."

A critical takeaway from the episode is the shift from channel-specific metrics to overarching business health indicators. Success should be measured by overall revenue growth, profitability, and customer lifetime value (LTV) rather than fragmented metrics from individual advertising platforms.

John Moran [29:12]:

"Channel reports don't matter. If your business is failing, who's going to pat themselves on the back?"

Emphasizing that the ultimate goal is business sustainability and growth, the hosts argue that internal metrics should align with long-term business objectives rather than short-term advertising performance.

Conclusion and Takeaways

The episode concludes with actionable insights on transitioning from ROAS to NCAC, emphasizing the importance of strategic ad spend, focusing on profitable customer segments, and adopting an omnichannel approach. The hosts encourage listeners to rethink their metrics and adopt more holistic measures of marketing success.

John Moran [36:34]:

"Use NCAC to determine how to scale and grow your business, not ROAS."

Lauren E. Petrullo [35:39]:

"Leave us a rating and review to help change the perception on ROAS and adopt metrics that truly matter."

Key Quotes

• Lauren E. Petrullo [02:52]:
  "ROAS is a no longer a leading metric. There are better ways to measure the growth and scale of business online."

• John Moran [12:15]:
  "ROAS is like an old metric. We should be focusing on Gross Profit or Net Operating Income instead."

• Lauren E. Petrullo [15:38]:
  "Our blended CAC went from 91 down to 60. New customer ROAS went from an average of 1.2 to 1.35."

• John Moran [20:13]:
  "Our sales are up 353%, our profit is up 506%, and our blended CAC has decreased significantly."

• Lauren E. Petrullo [25:37]:
  "Measure business health, never measure a report. If your business is failing, no report's going to tell you you're crazy."

• John Moran [36:34]:
  "Use NCAC to determine how to scale and grow your business, not ROAS."

Final Thoughts

This episode of Perpetual Traffic provides a thought-provoking critique of traditional ROAS metrics and presents a compelling case for adopting New Customer Acquisition Cost (NCAC) as a superior measure of marketing effectiveness. Through real-world examples and strategic insights, listeners are equipped with the knowledge to enhance their marketing strategies and drive sustainable business growth.

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