Historically, marketing decisions were based on a cocktail of intuition, experience, focus groups, and in the days of Mad Men, a martini lunch. CMOs believed that if enough people were aware
of your brand, and you had a compelling message, sooner or later, they’d buy what you were selling. This strategy wasn’t scientifically proven (nor was it particularly efficient), but over
the years, it managed to build some of the world's most successful brands.
Then came the Internet -- and with it, tools that marketers seemed willing to accept as truth. Suddenly, every click
was tracked, every ad impression received a spreadsheet, and every single dollar needed a return-on-something metric.
Today, ROAS is the single most dangerous metric in marketing -- but not
because it’s wrong.Because it’s incomplete.
Someone must plant the tree before the fruit can grow. If we agree that brand marketing is about growing the tree
(building awareness, creating emotional associations, and staying top of mind with future buyers) then performance marketing is about picking the fruit.
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ROAS measures how efficiently you
harvest what's already ripe and hanging within arm's reach -- a metric that’s particularly good for grading your pickers, but grading your farmers? Not so much.
In the
grand scheme of things, what ROAS fails to reveal is whether anyone bothered to plant a tree, water the orchard, or do anything to ensure there's fruit on the branch next season. A marketer can look
like a genius for a few quarters just by working the same low branches and that spreadsheet can appear strong right up until the day the low fruit runs out. But make no mistake, it always runs
out.
The rush never lasts as long as the hangover. When it comes to performance marketing, the initial rush is strong, and everything is great. Cost-per-acquisitions decrease,
conversion rates grow, and CFOs let more money flow into budgets.
But then comes the next phase of the exercise -- the one where audiences have already seen the ads and the easiest customers
have already made their purchases. In turn, increased competition raises media prices, (more precisely, “customer acquisition costs rise,") and you take more of a financial hit to generate the
same revenue. Eventually, you stop growing your business and just maintain the expensive addiction.
Just because something is immeasurable doesn’t mean it’s irrelevant.
It’s always easier to spend on a channel that suggests a whole sheet of conversions than on something abstract. To be fair, brand health isn't unmeasurable. In fact, awareness surveys,
before/after research, lifetime value, share of voice, etc. -- all take a crack at it. But because it's slower, messier, and doesn't fit neatly into a weekly dashboard, it loses the budget fight.
Conversely, brand marketing plants seeds of memory before the demand actually exists, giving customers a reason to think of your brand before they’re even interested in
making the purchase.
The world's best marketers never pick sides. Take a look at Coca-Cola, which spends billions of dollars reminding the world how happiness tastes through legendary
holiday commercials, concerts and global sporting events. It also operates effectively in all digital, retail, and any other performance marketing channels that exist. The company is planting trees
and picking fruit -- simultaneously.
Contrast this with Outpost.com, a company that burned through dollars trying to harvest clicks, coupons, and stunts to increase immediate conversion rates.
Like so many other dot-coms, spectacular spreadsheets became vanishing acts.
Growth is not achieved by picking sides between brand marketing and performance marketing. It’s achieved by
understanding that one creates demand and the other captures it.
So, the next time a marketer walks into your budget meeting holding a beautiful ROAS report full of fruit, ask that follow-up
question that doesn’t fit on a slide: “Sure, but who’s watering the orchard?” The answer won’t fit a spreadsheet, and that’s precisely why it matters.