With all Ad Platforms (Google, Meta, Microsoft, Amazon) increased dependence on AI, algorithms, automation, machine learning, endless attribution methods, black box bidding strategies and broad targetting, it’s becoming more and more difficult for advertisers to truly understand what’s actually working across channels, campaigns, ads, audiences and keywords.
To add to this, the industries focus on metrics such as Revenue, ROI/ROAS, CPA/CPL means that brands are loosing billions in profits every day, from unprofitable ad spend.
If you’re a brand or advertiser that sells items with multiple average order values or margins, and you’re working towards a ROI or ROAS target, it’s very likely that you’re making a net loss on the sale of certain items.
Let’ say “Item A” has an AOV of £120 and a margin of 50%. If we spend £55 making 3 sales for this item, we will generate an ROI of 6.55 and a healthy Profit of £125.
On the other hand, if “Item D” has an AOV of £80 and a margin of 20%, and we then spend £149 making 8 sales for this item, we will generate an ROI of 4.29 and a Profit of -£21.07 (a net loss).
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