ROAS: still alive and kicking...

Last year, we wrote the manifesto below to coincide with the launch of mimbi, our innovative platform designed to help brands better measure and optimize their retail media investment. Today, we maintain our stance that focusing on KPIs beyond ROAS is not only necessary but crucial for success in the evolving retail media landscape.

As industry expert Andrew Lipsman aptly stated, "[ROAS is] a metric that doesn't give you the full picture. You can narrowcast the targeting of a campaign to a small audience and you can have a very high ROAS, but it might not really move the needle on sales impact that much." His words underscore the importance of a more comprehensive approach to measuring campaign effectiveness.

While ROAS remains a relevant metric, it fails to capture the full impact of retail media campaigns, particularly in terms of upper-funnel activities such as brand awareness. The recent emergence of streaming / TV ads presents exciting opportunities for brands to engage with consumers in innovative ways, further emphasizing the need for a broader set of success metrics.

In the quest for more comprehensive and meaningful metrics, lifetime value (LTV) and incremental ROAS (iROAS) have emerged as valuable alternatives to the traditional ROAS approach. These metrics provide a more nuanced understanding of the true impact of retail media campaigns, taking into account factors beyond immediate sales.

By measuring and optimizing for LTV, brands can make more informed decisions about their retail media investments, ensuring that they are acquiring customers who will continue to engage with and purchase from the brand over time.

Similarly, iROAS aims to measure the incremental impact of a campaign. It's worth noting that there are nearly as many ways to define and calculate incrementality as there are marketers on Earth, making it a somewhat complex and subjective metric. However, this approach aims at isolating the true effect of the campaign, separating it from other factors that may influence sales.

In the meantime, TACOS (Total Advertising Cost of Sale) has emerged as a good and easy-to-use proxy for performance. TACOS takes into account the total cost of advertising, including both ad spend and associated fees, and compares it to the total sales generated. This metric provides a more comprehensive view of the cost-effectiveness of a campaign, making it a useful tool for evaluating and optimizing retail media investments.

So, as we look ahead to the future of retail media, let's keep an open mind and a keen eye on the KPIs that matter most. And who knows? Maybe we'll reconvene next year to see if ROAS is still hanging around or if it's been relegated to the annals of marketing history. Until then, let's keep pushing forward and experimenting with new approaches!

Our manifesto, from March 2023 (it hasn't aged too badly)