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Part II: RoAS vs. ROI in Influencer Marketing

RoAS vs. ROI in Influencer Marketing

In our previous blog we assessed the truth about RoAS and its importance to the influencer advertising industry. In this post, we’ll look at the differences between RoAS and ROI and which metric to take into account in what scenario.

There are quite a few ways in which RoAS differs from ROI, but there is one great equalizer – any good business would aim to track both these metrics. On a basic level, ROI (Return on Investment) is used to determine the total profits made from investments; whereas, ROAS (Return on Ad Spend) dictates if an investment has returned revenue to the business. Understanding these differences helps clarify when to employ each of these metrics to evaluate success. Before we take a look at the differences, let’s understand what ROI is. ROI stands for return on investment. It is a metric used to determine the total profits made from investments. Any good business would aim to track both these metrics. The RoAS lets you know if a campaign has been successful in driving revenue.

To gain a deeper understanding of these metrics, let’s take a closer look at:

  1. Understanding RoAS vs. ROI
  2. The power you can unlock by measuring RoAS
  3. How to improve RoAS

1. Understanding RoAS vs. ROI

RoAS typically falls short of illustrating whether your influencer campaigns are in fact profitable for the business. Profitability should always be the end goal and typically RoAS is not your go-to metric to help assess profitability by itself. This is where Return on investment (or ROI) steps in, as it takes different fundamentals into consideration.

Let’s have a look at the core differences between the two ROI and RoAS:

ROI RoAS
ROI measures the total revenue from an overall investment. RoAS determines your revenue for a particular marketing campaign
ROI illustrates the overall picture of profitability. RoAS indicates how successful a particular marketing campaign is.
ROI assesses overall profit. RoAS looks at revenue.
ROI takes into account the overall cost which includes people, tools and other expenses. ROAS only takes the cost of the marketing campaign into account..

2. The power you can unlock by measuring RoAS

In our view, marketers have defaulted to top funnel stats for too long taking into account impression(s), reach and engagement as the sole metrics to base their decisions on. And although we’re absolutely not negating the importance of strong top-funnel results, simple facts illustrate you can’t pay the bills from a campaign that has driven a billion impressions but hardly any sales. Modern day technology and a data-driven approach enables us to compare RoAS figures across high performing creators and creative(s) with the flick of a switch, as long as the right technology is in place.

Top advantages of measuring the RoAS of your influencer marketing campaigns:

  1. Know where to allocate your budget. RoAS monitors the average performance and returns on your influencer marketing campaigns to indicate which social platform, creative and creators are worth your investment. ;
  2. Optimize spends in real-time. You will obtain accurate data to support changes in the campaign budget or an increase in influencer spends that you can justify throughout your business;
  3. Leverage an apples to apples approach. Using RoAS across the board will help you compare campaigns effectively to quickly assess which ad spends are worthwhile;
  4. Cut your losses. If an influencer campaign isn’t doing well, your marketing team needs to know that quickly and RoAS gives you that information.

In our view, marketers have defaulted to top funnel stats for too long taking into account impression(s), reach and engagement as the sole metrics to base their decisions on. And although we’re absolutely not negating the importance of strong top-funnel results, simple facts illustrate you can’t pay the bills from a campaign that has driven a billion impressions but hardly any sales. Modern day technology and a data-driven approach enables us to compare RoAS figures across high performing creators and creative(s) with the flick of a switch, as long as the right technology is in place.

These are just a few of the reasons we love leveraging RoAS as a central measure of success for our influencer campaigns. The below  snapshot of our Performance Cockpit demonstrates just how valuable this metric can be.The 1st column displays the impressions this campaign has driven, the second column displays the revenue generated, and the third indicates the RoAS the influencer and creative have generated.

At the time of writing this article, the organic reach on Instagram is 3%. That implies that when you work with an influencer who has a 100.000 followers, you reach 3.000 of those p/post.

Unpack this even further, we can analyze granular details including organic performance vs. paid performance across metrics such as “Reach”, “Engagement”, “Acquisition”, “Conversion” and “Revenue”. To date, we haven’t discovered a correlation between organic performance and paid performance and determine if organic results are a driver of this however, organic sales are more of an exception, rather than the norm.

3. How to Improve RoAS

Once you start tracking RoAS accurately, you will know how effective your influencer marketing efforts truly are. You can also begin to uncover strategies to improve RoAS. The easiest, quickest and most straightforward way is to lower your ad spend and review your ad campaigns. However, there are a few other ways we at The Cirqle like to improve RoAS as well:

  1. A/B testing to consistently swap creatives, influencers, audience sets and copy on your campaigns. In fact, we recommend tweaking creative(s) and copy on a bi-daily basis to evaluate results quickly and efficiently.
  2. Target broad audiences in your boosted influencer creative to learn as much as you can before ruling anyone out on a hunch.
  3. 30-45 day flights for each paid media campaign (if not longer) give you a solid understanding of what’s working and what’s not so you know how to optimize your spends.
  4. Risk Tolerance is key to unlocking the power measuring RoAS can bring to your business. You have to be willing to test and learn and then test and learn again until you find the magic recipe for your business.

If there is one thing we can’t stress enough, it’s to incorporate RoAS into your success metrics. Have questions about how to do this?

Book a meeting with our CEO here to learn more about how to build an influencer strategy for your business that drives RoAS.