Using Retail Media Networks for Outcome-Based Marketing

Is ROAS the right metric for RMNs? Retail Media Networks (RMNs) have outgrown their early days when untapped demand meant every dollar spent was both high-ROAS and high-incrementality. Today, focusing solely on ROAS incentivizes behaviors that may appear efficient but harm long-term profitability and growth. Here’s how ROAS can be gamed—and why it’s problematic: 1️⃣ Over-spending on Retargeting or Brand Keywords. These tactics drive high ROAS but focus on customers who were likely to convert anyway, resulting in low incremental growth. 2️⃣ Discount-Driven Sales. Discounting boosts ROAS by generating short-term revenue but lowers margins, attracts low-LTV customers, and conditions buyers to expect promotions. 3️⃣ Cutting Spend on High-Incrementality Campaigns. Investing in new customer acquisition or brand building may have lower ROAS but drives long-term growth and quality customer cohorts. These behaviors lead to: ⛔️ Shrinking new customer cohorts. ⛔️ Increased reliance on discounts, reducing margins. ⛔️ Lower customer lifetime value (LTV) and diminished profitability over time. In essence, chasing ROAS at all costs leads to slower growth and declining margins—a losing combination for any business. Efficiency metrics like ROAS are necessary but must be balanced with an effectiveness metric that focuses on long-term outcomes. For example: ✅ 180-Day Contribution LTV: Measure the total revenue contribution from full-price customers acquired over six months. ✅ Incremental Revenue from Non-Brand Keywords: Track revenue generated from truly new demand sources. ROAS is an excellent efficiency metric but a poor north star. Striking the right balance between efficiency and effectiveness will ensure your business scales sustainably while maintaining margins. Keen to hear what other metrics are used for RMNs #advertising #media #tech

The iROAS Paradox: Is Goodhart's Law Sabotaging Retail Media? Let's cut through the noise on iROAS. It is a crucial step up from vanity ROAS for measuring causal impact in retail media. Essential. ...BUT.... Goodhart's Law ('When a measure becomes a target, it ceases to be a good measure') is hitting hard. When iROAS becomes the sole target, not just an insight, its value degrades & distortion begins. Hot Take #1: We need to stop treating iROAS as infallible. It’s a less flawed metric, but its perceived precision is often an illusion – 'incrementality theatre' via weak methodology leading to dangerously confident decisions on fuzzy math. Hot Take #2: The real issue isn't just the metric; it's the organizational obsession with hitting a single number . We incentivize gaming the system when iROAS becomes the only key to success. The Downstream Damage: Short-termism: Sacrificing long-term brand equity and customer acquisition for immediate, measurable incremental gains. Gaming the System: Prioritizing easily measured campaigns over potentially higher-impact (but harder to measure) ones. Fighting over attribution windows and control group selection. Siloed Thinking: Maximizing iROAS within the retail media channel can occur at the expense of the total marketing mix effectiveness. Are we just shuffling conversions around or truly growing the pie? Stifled Innovation: Fear of missing the iROAS target discourages testing bold new strategies or unique plays within these powerful retail platforms. So, what's a better approach? Demand Rigor & Transparency: Don't just accept the iROAS number. Interrogate the methodology. Prioritize partners and platforms committed to robust measurement (clean holdouts, solid geo-testing, transparent models). Balanced Scorecard is Non-Negotiable: iROAS is critical, but it must sit alongside metrics reflecting overall business health: total sales velocity, profitability (post-ad spend and trade spend), new customer acquisition, category share, and even brand lift where measurable. Think Enterprise Value, Not Just Channel Metric: How does retail media investment contribute to overall growth and profitability, considering all marketing levers? Break down the silos. Podcast Plug: Just dove deep into this with Daniel Torres Dwyer on The FMCG Guys podcast-episode dropping soon.

ROAS vs. Incrementality: Are We Measuring What Matters? #RetailMedia networks have disrupted digital advertising with first-party data and closed-loop measurement. But as investment grows, so does the scrutiny: Are we measuring true impact, or just validating ad spend? 🔹 ROAS is the industry standard, but is it enough? It attributes sales to ads but doesn’t account for purchases that would have happened regardless. It’s an efficiency metric, but it doesn’t necessarily prove causality. 🔹 iROAS forces a higher standard. By using holdout tests, geo-lift studies, synthetic controls, or RCTs, advertisers can isolate incremental sales. However, these methods require investment in measurement infrastructure and careful implementation. 🔹 Retailers have the data—how will they use it? “Retailers can report incremental sales with greater accuracy than any other media company,” Christine Foster, vp product strategy and media operations for Kroger Precision Marketing at 84.51˚. “We know exactly what the baseline organic sales should be in any category we sell.” 🔹 Retail media is evolving beyond performance marketing. As RMNs expand into off-site ads and upper-funnel media, the need for standardized, rigorous measurement is growing. With retail media networks becoming full-funnel advertising platforms, the question isn’t just which metric is better—it’s about understanding what you’re actually measuring. Had the awesome opportunity to talk to Kimeko McCoy from Digiday on retail media measurement and how we can help retailers and brands drive growth!