Xiaoyun TU
Businesses that don’t invest in their future may not have a future to look forward to.
Whether you’re investing in your human resources or in critical tech, some outlay in the short term is always needed for long-term success. That’s true when it comes to marketing as well — you can’t market your product or service without investing in advertising. But if that investment isn’t turning into leads and conversions, you’re in trouble.
It’s vital to identify and apply the most suitable metrics based on business goals, and there’s no one best practice or one-size-fits-all method.
However, smart use of the return on advertising spend (ROAS) data can triple lead generation, as I discovered when I joined Brightpearl to restructure the marketing campaigns. Let’s take a look at some of the ways Brightpearl used ROAS to improve campaigns and increase lead generation. The key is to work out what represents a healthy ROAS for your business so that you can optimize accordingly.
Use the right return metric
It is paramount to choose the right return metric to calculate your ROAS. This will depend partly on your sales cycle.
Brightpearl has a lengthy sales cycle. On average it’s two to three months, and sometimes up to six months, meaning we don’t have tons of data on a monthly basis if we want to use new customer’s revenue data as the return metric. A company with a shorter sales cycle could use revenue, but that doesn’t help us to optimize our campaigns.
We chose to use the sales accepted opportunity (SAO) value instead. It usually takes us about a month to measure, so we can get more ROAS data at the same time. It’s the last sales stage before a win, and it’s more in line with our company goal (to grow our recurring annual revenue), but takes less time to gather the data.
By the SAO stage, we know which leads are good quality — they have the budget, are a good fit, and our software can meet their requirements. We can use them to measure our campaign performance.
When you choose a return metric, you need to make sure it matches your company goal without taking ages to get the data. It also has to be measurable at the campaign level, because the aim of using ROAS or other metrics is to optimize your campaigns.
Accept that less is more
I’ve noticed that many companies harbor a fear of missing out on opportunities, which leads them to advertise on all available channels instead of concentrating resources on the most profitable areas.
Prospects usually do their research on multiple channels, so you might try to cover all the possible touch points. In theory, this could generate more leads, but only if you had an unlimited marketing budget and human resources.
When I joined Brightpearl, we were advertising on multiple channels because we wanted to target prospects through the whole buying journey. However, audiences on different channels are usually at different stages in their journey or show different buyer intents, which means the ROAS is usually different by channel. For example, people who search Google for a retail operating system clearly show a stronger buyer intent than people on LinkedIn who are just checking some back-office operations-related content.
I compared performance across channels and found that Adwords was by far the most profitable. Then I asked myself: Is there still room to grow on Adwords? By shifting the money from other channels, could I get more leads at a similar or even better ROAS?
I used the different available metrics in Adwords (like Impression Share and keyword bid simulator) to see if I could spend more money on the top-performing keywords and get incremental leads. I also checked the landing pages’ performance to see if we could improve the conversion rate. Then, I decided to stop using all the other channels (such as social media and third-party publishers) for the moment, because we could still develop Adwords to achieve more leads and a better ROAS.
I’d recommend focusing your resources on the best-performing channels first and make sure you’ve maximized the leads you can get from them before moving on to lower-performing channels.
Adwords’ Bid Simulator shows the potential traffic and conversions you could get by increasing bids, as well as the additional budget required. It’s not 100% accurate, but it gives a good view of whether there is still room to grow top-performing campaigns, and the incremental cost needed to get one extra click or conversion.
As you can see in this screenshot, the budget would increase from £39 to £1,662 for 73 clicks and two extra conversions. In this case, other channels or campaigns may provide a better return.
Remember related metrics
ROAS is a valuable metric, but it’s helpful to use it in combination with related metrics to identify the most valuable prospects. For example, we can break down the metric into two factors: Number of conversions and average order value (AOV).
By looking into these two factors, we can tell if a higher ROAS is mainly due to higher conversion volume or higher average order value. This provides extra information on the target audience for a certain campaign.
At Brightpearl, we used Adwords to target different keywords, and we noticed some keywords brought us leads with a higher AOV. Sometimes the AOV variation by keyword can go up to 30%.
It was very interesting to realize that the audiences behind the keywords were so different. We also noticed that people searching for certain competitor keywords were less likely to convert, but if they did, their AOV was much higher!
Based on these insights, we optimized our landing pages and ad copy for higher AOV keywords to better speak to high-value companies. We promoted features that are more relevant to bigger companies’ pain points.
It’s very important to give this feedback to the product and marketing teams and work with them to improve the messaging. You should also talk to customers to get their reaction.
Get the timing right
As I mentioned earlier, it’s more difficult to measure performance if you have a lengthy sales cycle. This might involve several different stages, like marketing qualified lead (MQL), sales qualified lead (SQL) and sales accepted opportunities (SAO).
You have to factor in this timespan when thinking about ROAS. If you can speed up the sales cycle, you’ll get more data around ROAS and any other metrics to help you optimize your campaigns. Faster sales cycles also potentially mean fewer lost leads. If we can’t react quickly to leads, they might turn to our competitors.
At Brightpearl, we decided to tighten the top funnel by asking prospects questions to help us understand factors like business size and order volume. When someone fills in a “book a demo” form, our sales team uses the customer information to help them prioritize leads and focus on the higher-quality ones first.
I’ve tried to ensure we’re really data-driven, so it’s important to check how long the sales team spends at every lead stage — such as the average number of days they take to move from MQL to SQL or SQL to SAO. From this data, we can work out the best time frame to move customers through the funnel.
Once we set that benchmark, we set up a warning system to show us when MQLs haven’t been moved to SQL or if they’re still open beyond the ideal number of days. We can flag that to the sales teams and get answers on what happened and why the process was slow.
Speeding up the whole sales funnel helps us to be more proactive and use our sales resources more wisely. We don’t have unlimited sales reps, so we need to make sure that they’re working on the prospects who are most likely to convert.
In conclusion
The main thing to remember is that a “good” ROAS score is different for each company and campaign. If your figure isn’t where you’d like it to be, you can leverage ROAS data to create targeted campaigns and personalized experiences. This will help you avoid wasting money on underperforming campaigns.
It’s a good idea to balance your growth rate and the acquisition cost. For Brightpearl, we were seeking a higher growth rate, so we decided to lower our ROAS target to target more upper-funnel channels or prospects who are in earlier buying stages.
Our next focus is account-based marketing (ABM), which means using company lookup tools and intent data to identify the businesses that fit our ideal customer profile and are showing interest in retail operating systems, no matter if they’re actively searching for a solution or not. Then we’ll create tailored content to get them into the funnel.
Knowing what your target audience’s current pain points are is very helpful, and intent data will help you make great guesses. For example, we noticed that companies were searching for how to avoid inventory loss a couple of months after the pandemic started. We ran a webinar on data-driven inventory demand planning tools to help them optimize inventory costs for a healthy cash flow. It brought us a couple of new customers.
To recap, here’s how Brightpearl increased lead generation by using ROAS:
- Choosing the right return metric.
- Focusing on best-performing channels.
- Using ROAS alongside related metrics.
- Speeding up the sales cycle.
Analyzing ROAS, alongside other metrics, helps to build a truer picture of campaigns’ effectiveness and ensures that we use all the relevant data to inform our marketing decisions. That way, we can concentrate on high-value leads to grow our business.
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