I enjoyed reading this article in Entrepreneur, and I decided to dig a little deeper into the concepts discussed. In particular, the article referred to ROAS, or Return On Advertising Spend. A Google search provides the following automatic answer:
The formula is quite simple. You simply divide the revenue that is produced by advertising by the dollar amount that is spent on that particular advertising to arrive at your ROAS.
Unfortunately, as the author of the article noted, the marketing challenge is never that simple. ROAS is frequently used to select advertising channels. In the real world, ad channels don't perform independently, and the length of the sales cycle has to be adjusted from both the product and the target audience. No easy answers.
Entrepreneur: Marketing Is Still an Art (and a Science), 2019-Dec-28 by George Deeb
And lastly, we were managing our agency to optimize the wrong data metric. We were pushing them to drive an immediate ROAS. The problem with that was the only transactions that happened immediately, were the small ticket online ecommerce orders worth $500 each. Not the big $5,000 offline orders we wanted to be closing, which had a longer 2-3 month sales cycle. We immediately shifted gears and told our agency not to worry about immediate ROAS (we would track that in 3-4 months). Instead, the only data point we care about is driving big-ticket leads into our sales pipeline (that we know won’t close for 2-3 months). In this case, patience for proving ROAS would be a virtue.