Why you need to start thinking about blended ROAS
What is Blended ROAS?
Blended ROAS, also referred to as MER (marketing efficiency ratio) or an Ecosystem ROAS, is simply a brand’s total revenue divided by the total ad spend across all channels.
It is calculated using:
(Revenue / Total Marketing Cost) x 100
Why should you use blended ROAS?
Blended ROAS is not a new concept, but has gained popularity in recent years due to the decreasing reliability and volume of conversion data being tracked in paid media platforms. This has partially been brought about due to the impact of 3rd party tracking and cookie limitations introduced. Facebook rolled out their elimination of the 28-day click, 1-day view window in January 2021 and automatically switched to a significantly shorter 7-day click, 1-day view window. This was followed up by Apple’s iOS14 update and Google’s Privacy Sandbox initiative in 2022, restricting the ability for platforms to track users across apps and websites and therefore the efficacy of their tracking pixels and the conversion data recorded.
The varying impact of these changes on different platforms has also led to conversion data inconsistencies, for example only 1 conversion being attributed to a Facebook campaign in platform, but 4 conversions attributed to it in Google Analytics. All of this adds up to make in platform conversion data difficult to trust. The under recording of conversions can considerably restrict your ability to scale ad spend, particularly if you are working to platform ROI/ROAS goals in order to dictate budget allocation. This in turn can have a detrimental affect on your topline revenue and the growth of your other channels; given the high proportion of sales paid channels tend to contribute. From a non-revenue standpoint, an inability to scale paid media spend will constrain the ability to raise brand awareness by reaching new consumers; restrict website traffic and the growth rate of organic channel followers and email subscribers.
Rather than relying purely on in-platform attribution and making KPI goals specific to each platform, we recommend transitioning to Blended ROAS goals as your primary means of evaluating if ads are performing well. In platform metrics still play a role in determining the performance of individual campaigns or assets, but the conversion data should be taken with a pinch of salt.
Blended ROAS provides the best holistic view of how your business performs and enables you to quantify the role of Paid marketing on Organic and other channels. This may seem like a daunting transition, but is certainly one to be made immediately. Digital marketers have been spoilt by an incredible amount of data that let us know exactly which ads were performing the best and exactly how many purchases each ad was generating. However, it is worth remembering that advertising was being run before this data became available, with marketers fundamentally looking at Blended ROAS to determine efficiency. In short, this transition is just a return to basics and not one to be feared.
Drop us a line at [email protected] if you want to talk to one of our experts about implementing this yourself.