Why everyone is (mistakenly)
talking about ROAS?

#1 Insight after reviewing 1000+ ad accounts

Online advertising has a fairly short lifespan. In the beginnings, the holy grail of metrics was always CPP (click-per-purchase). No matter if we are talking Facebook ads, or Google ads, CPP was supposed to measure success. However, it was not long until people started using ROAS instead because CPP did not…COMPLETE HERE

Today, ROAS is constantly mentioned as the metric to take in count. Is not unusual to hear advertisers celebrating that they got a 5x ROAS in the last quarter or 10x ROAS in 2 days. The truth is that ROAS does not mean much without context. Is natural to believe that when you quintuplicate your ROAS, you are on the path to growth and that these numbers will remain and even get pumped.

However, as CPP before, ROAS fails to take into account the long-term value of your products and this can have big consequences when you are managing budgets.

If you are not generating a long-term business impacts, then ROAS only means you are having a lucky strike. You will be able to cash-up those sales and if you earn 100US revenue versus the 10US you put to acquire those purchases, you will be happy with those 10x ROAS, but no luck strike last long enough.

Chances are that you are failing to understand the success and failure of most of your campaigns because you are not looking at their LTV (Life-Time Value)

Long-term business is a healthy business.

The competition on the e-commerce, lead generation and app install industries is getting fierce. There is really no business safe from being buried by cheaper, better quality and more structured competitors in the next 2-3 years, particularly on Facebook Ads.

If you want to make it with your business the proper way, you NEED to focus on the LTV of your campaigns.  This metric goes beyond the current value of your ads and take into consideration the potential value of your business. LTV is truly where the future of Facebook ads is headed.

Now I will explain you how we have been using a strategy that revolves around LTV. This strategy has proven to be the most efficient strategy for every client, not matter the industry or the product.

A $45MM in ad-spend way to run your Facebook ads: The ARR strategy or the Acquisition Retargeting and Retention strategy.

The ARR Strategy

If you have high ROAS, it means that you are nailing Acquisition, but not necessarily Retargeting nor Retention. This is NOT a sustainable solution, and IT WILL fall down, sometimes as fast as it came in.

My advice to you is to STOP keep looking for the golden eggs, and instead search the chicken that puts them. That is Retargeting and Retention. 

 The long story short of ARR is this

  • You need to reduce the cost of Acquiring new customers.
  • You have to Acquire new Customers – Retargeting.
  • And finally, you need to sale more to those customers – Retention.

These are the 3 laws of ARR and what will keep your LTV high. These laws and the ARR strategy in general can be used every single time. However, is very important to take in count that each part of the strategy must be scaled INDIVIDUALLY

Your audiences, advertisements, campaigns and the whole structure of you strategy will be far more organised and efficient if you separate them by Acquisition, Retargeting and Retention. They need different focus and they must be grown individually.

Now I will briefly get into each step and give you a few tips on how to improve each one separately. 

1.Acquisition

SUMMARY OF ACQUISITION

2. Retargeting

SUMMARY AND TIPS FOR RETARGETING

3. Retention

SUMMARY AND TIPS FOR RETENTION

Troubleshoot with ARR

At the madgicx.com platform we have realized the important of putting metric back to back in order to discover where campaign are succeeding or failing. 

The next screenshot is from the the Dashboard found within the platform and as you can see, the ARR strategy is the center piece of it. You can see very clearly when GIVE EXAMPLE TAKEN FROM THE BOARD

ENCOCURAGE READERS TO TRY THE DASHBOARD WITH FREE TRIAL AT MADGICX.COM

Conclusions

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If you would like to know more about the ARR strategy, how to grow your LTV and practical examples that we used at our agency to run ads on every step of the funnel, watch my full presentation at the main stage of the Affiliate World Conference in Barcelona of this year.

Yahav Hartman

Yahav Hartman

Yahav Hartman is the Founder & CEO of madgicx.com, the fastest growing Ad-Tech platform for Facebook Ads.
Over the last 7 years, Yahav has worked closely with Facebook product growth and marketing partners teams on developing advertising and marketing technologies for big spenders and Fortune 500 brands in eCommerce.

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