Most ecommerce businesses rely heavily on advertising to draw customers to their websites, and in the case of retargeting, remind them of past visits or past purchase intentions. When it comes to measuring return on ad spend (ROAS), there are a handful of common pitfalls that ecommerce marketers must know how to navigate.
Here are four common mistakes related to assessing ROAS, and how to avoid them.
Double (Or Triple) Dipping Revenue
Often, ecommerce businesses will use different marketing agencies to manage different channels. One agency will run the email campaign, another social media, etc. There is absolutely nothing wrong with this — that is, unless the measurement is conducted using data from the different platforms.
Google, Facebook and other platforms have their own data and are all too happy to claim success for a conversion. Let’s say your customer has seen a Google ad, a Facebook ad, maybe a retargeting display ad. They might have engaged with several ads, but only made one purchase. The problem now is that in many cases, adding up the data from the different platforms will make you believe that you sold a multiple of what was actually purchased.
It’s only through the use of your CMS system or Google Analytics last touch attributions that you’ll avoid over-counting purchases.
Incorrect Growth Measurement
As ecommerce sales boom and bust in cycles, you naturally want to know what happened. Asking yourself questions about irregularities is highly recommended. Jumping to conclusions about the effectiveness of a paid ad campaign because you see a sudden change is, however, far from prudent.
Sometimes the most mundane reasons can cause spectacular changes in patterns. For instance, if a period of cold and rain is followed by nice weather, people run outside and soak up the sun, and demand can fall off. Did this mean that the advertising campaign faltered? No, of course not.
Month-over-month measurement is not very instructive for campaign performance, and daily metrics make even less sense. You will do well to focus on year-over-year (YOY) measurement.
Wrong Measurement Design
Another common measurement mistake is ignoring channel differences. Google ad cookies used to expire in 30 days. Most ecommerce marketers were very well aware of this and yet got into trouble when Google’s data was compared with data from other channels. It’s important to be able to compare apples to apples, or, if that is not possible, apples and oranges, to at least know how many apples an orange is worth.
Another mistake pertains to plain errors in setting up the data sets. Google Analytics is a boon to ecommerce marketers looking to measure ROAS, but only if you truly understand how to work it. One mistake that can have a far-reaching impact is not accounting for the correct traffic source when customers go through PayPal (or any other payment portal) where an inexperienced user might leave Google Analytics to attribute those sales to PayPal and not the source of traffic that preceded the visit.
Listening Too Much to Sales Reps
Sales reps of Google, Facebook and other platforms will claim extraordinary value in explaining platform functionality, but they’re not impartial consultants when it comes to advice on the usefulness of platforms and how success should be measured.
These same sales reps will, for example, often try to convince you that you’re leaving impressions on the table, that their bidding is suboptimal so they don’t rank as high as they could. The fact of the matter is that ranking high is not always what you want or should want to achieve, because the loss in margin will often not be compensated by the increase in sales volume.
The Bottom Line
Technology makes it possible for ecommerce businesses to measure ROAS in a myriad of ways. This is a boon to ecommerce marketers, but also a factor that increases the likelihood of costly mistakes. You need to avoid overcounting purchases by relying on your CMS to attribute sales, stick to YOY measurement, take extra care of correct measurement design, and not listen too much to platform sales reps in terms of how to measure success.
Darwin Liu is the founder and CEO of X Agency