Are you an e-commerce business owner struggling to figure out how to measure ‘success?’ Time and again, I’ve consulted with e-commerce businesses so narrowly focused on ROAS, they can’t see the forest through the trees.
ROAS is one important metric…
… But, it’s not the only important metric.
What if your ROAS is 3.5X and you’re confused why your business is struggling to stay profitable? Do you know your retention rate? Do you know your LTV? Let’s look at 2 business examples to illustrate this better:
Annual revenue is $950,000,000 (for easy math)
They’re running Facebook ads and generating 3 X ROAS for their efforts. Their marketing budget is 30% of revenue.
They spent $300k in ads over a full year and made $900k from those ads… $900k came from ads and $50k came from repeat purchasers.
But they’re struggling to break even on the business side.
Turns out they don’t know their retention rate is only 5%. So while their front end marketing is doing great, they only have 5% of first-time purchasers coming back for more. They have a retention problem. Without repeat purchasers increasing their LTV, their business will not be able to scale effectively.
Annual revenue is $1,000,000 (for easy math)
They’re also running Facebook ads but only generating 2 X ROAS for their efforts. Their marketing budget is 15% of revenue.
They spent $150k on ads over a full year and made $300k from those ads… $300k came from ads and $700k came from repeat purchasers.
Their business is ready to scale.
Why? Because they have a fantastic retention rate and strategy in place. They know and understand that ROAS is part of the equation but not everything. Their business is healthy and they are able to reinvest a higher marketing budget to scale effectively.
So, next time you’re looking at ROAS, ask yourself some deeper questions –
What’s my retention rate?
What’s my LTV?
What’s my low-hanging fruit to generate more revenue from my current customers and email list?
The reason why we are so powerful and get the results we do for our clients is because we look at their entire business from the perspective of a business owner, not just an advertising manager. We’ll help you come up with a strategy for scalability and then execute on it with you and your team.
Are you ready to level up your eComm business? Let’s hop on a call and see how we can help get you there.