"While the number of ad clicks and conversions is increasing, I have no confidence that it is truly contributing to the business's profits." "ROAS (Return on Ad Spend) should be high, yet for some reason, profits are stagnating."

Many marketers face challenges like these. The fundamental cause lies in the fact that traditional advertising effectiveness metrics do not capture the complete picture of advertising investments.

This article clarifies the limitations of short-term metrics like ROAS and explains a multi-faceted approach to visualize the true value of advertising investments. By the end of your reading, you should have a new perspective that allows for data-driven essential decision-making and guiding the business to the next stage.

1. The Trap of ROAS Faith: Sales-Based Measurement Eroding Profits

Many ad operators track ROAS (Return on Ad Spend) as a daily metric, but relying solely on this can inadvertently harm profits. From a management perspective, the most important metric is ROI (Return on Investment), which shows final profit, and there is a decisive difference between the two.

• ROAS (Return On Ad Spend): This is a metric that indicates how much "sales" occurred relative to advertising costs. It helps measure the short-term efficiency of each ad channel and campaign.

  • Formula: Sales ÷ Advertising Costs × 100

• ROI (Return on Investment): This metric shows how much "profit" was achieved relative to advertising investments. It is essential for evaluating the overall health of the business.

  • Formula: (Profit - Advertising Costs) ÷ Advertising Costs × 100

Even if ROAS is high, considering costs such as cost of goods sold and operational expenses, there exists a "trap of ROAS" where ROI turns negative. For example, consider a campaign with an advertising cost of 1 million yen that generates 3 million yen in sales (ROAS 300%). However, if the profit margin, including the cost of goods and expenses, is 30% (profit of 900,000 yen), the final profit after deducting advertising costs becomes -100,000 yen, leading to a negative ROI. This trap is particularly common in e-commerce businesses dealing with low-margin products, where an increase in ROAS figures can occur without realizing the actual losses.

To accurately evaluate advertising results, it is extremely important to consider ROAS as a day-to-day operational metric but to make the final investment decisions based on profit-based ROI.

ROAS is easy to track within advertising platforms and is a useful metric for operators to make daily improvements; however, it fundamentally has the limitation of not considering costs such as cost of goods sold and operational expenses, as it is sales-based.

While ROI clarifies short-term profitability, it only captures immediate conversions. What about the 99% of users who saw the ad but did not click right away? Changes in their brand perception represent significant long-term assets that can generate future earnings. The next chapter delves into ways to visualize this invisible value.

2. The Value of the 99% That Doesn't Click: Visualizing the "Intangible Assets" of Advertising Through Brand Lift

Strictly chasing direct performance metrics like click-through rates (CTR) and conversion rates (CVR) has its limits. These metrics only capture a small part of the impact advertising has. They overlook the changes in the minds of the majority of users who encountered the ad but did not click.

What becomes important is the concept of "brand lift." Brand lift measures how positively consumer awareness, perception, and attitudes towards a brand change as a result of encountering the advertisement.

In brand lift studies, primarily three indicators are measured:

• Ad Recall: How well users remember seeing the ad. It measures the impression and reach of the ad.

• Brand Awareness and Favorability: Whether users know the brand name and what feelings they have towards it. This is an important indicator that connects to differentiation from competitors.

• Purchase Intent and Usage Intent: How much the desire to "want to buy" or "want to try" the product or service has increased.

Brand advertising is not a short-term expense; rather, it is an investment aimed at reducing future customer acquisition costs and building long-term assets represented by the brand. A strong brand acts like a magnet. If customers already know and trust your brand (high brand awareness and favorability), the efficiency of performance measures like search ads increases, leading to long-term improvements in CTR and reductions in CPA. Measuring brand lift allows us to visualize this invisible asset value and make strategic investment decisions that contribute to medium- to long-term business growth.

While measuring changes in "feelings" is powerful, management often seeks more concrete evidence. How does this positive attitude lead to visible "actions"? To prove this, we need to look at objective behavioral data.

3. From "Feelings" to "Actions": Objective Evidence of Search Lift and Purchase Lift

While brand lift studies are very effective at capturing changes in consumers' "feelings," they are based on self-reported surveys. In contrast, new methods of measuring advertising effectiveness based on more objective "behavioral data" are gaining attention. These are "search lift" and "purchase lift."

• Search Lift: This is a method that measures how much more people who encountered the ad searched for that brand or related keywords compared to those who did not. It serves as objective evidence that the ad sparked user interest and curiosity, leading to information-seeking behavior.

• Purchase Lift: This is a method that measures how much more people who encountered the ad actually purchased products compared to those who did not. It directly proves the causal relationship between ad exposure and purchasing behavior.

These behavior-based metrics are stronger objective evidence of ad effectiveness than survey-based "attitude changes." In particular, purchase lift provides strong evidence that brand advertising directly leads to increases in sales, making it very effective for demonstrating the validity of ad budgets to management.

Pro Tip: When planning advertising campaigns for brand awareness, not only set brand lift as the ultimate goal but also establish concrete target values for search lift as an intermediate KPI (e.g., a 150% increase in brand searches for the exposed group compared to the non-exposed group). This way, you can demonstrate a specific outcome of increased interest and curiosity in the brand due to the ad, making it easier to fulfill accountability to management.

4. The Key to Breaking the CPA Curse is LTV: Optimal Solutions for Advertising Investment Seen Through Customer Lifetime Value

Many marketers focus too much on keeping CPA (Cost Per Acquisition) low. However, this "CPA curse" can cause the loss of long-term business growth opportunities. To assess the long-term health of advertising investments, the metric of LTV (Customer Lifetime Value) is essential.

LTV refers to the total profit a company generates from a customer throughout the entire period from initiation to completion of their transactions. The basic growth strategy in digital marketing is based on the belief that "as long as LTV exceeds CAC (Customer Acquisition Cost), that advertising investment will be successful in the long run."

For example, consider two advertising campaigns.

• Campaign A: CPA 5,000 yen / LTV 15,000 yen

• Campaign B: CPA 8,000 yen / LTV 50,000 yen

If you look only at the short-term CPA, Campaign A seems superior; however, considering LTV reveals that Campaign B is acquiring much more valuable customers that will generate significantly larger profits in the long term. Thus, even if the CPA is temporarily high, if it can acquire customers with high LTV, that advertising can be deemed a strategically correct investment.

It is essential to adopt a long-term perspective based on LTV rather than judging the effectiveness of advertising solely based on short-term CPA figures; this is key to achieving sustainable business growth.

5. From Points to Lines: Connecting the Overall Picture of Advertising Effectiveness with the AARRR Model

So far, we have examined important indicators such as ROI, focusing on profit; brand lift, which builds assets; and LTV, which measures long-term value—metrics that are often discussed individually. However, how do these metrics interconnect? The strategic blueprint for this is the "AARRR Model." This framework elevates individual data points (points) into a cohesive customer journey (line) that leads to sustained growth.

The AARRR model breaks down and analyzes customer behavior into the following five stages:

• Acquisition: The stage of attracting potential customers to visit your site or service for the first time.

• Activation: The stage where visitors experience value for the first time and convert into actual users.

• Retention: The stage of promoting continued use of the service among customers.

• Referral: The stage where satisfied customers recommend your service to friends or acquaintances.

• Revenue: The stage of converting relations with customers into profits and maximizing them.

The role of advertising does not stop at the initial "Acquisition" stage. Especially the "Retention" and "Referral" stages are crucial moments for nurturing and maximizing LTV, as mentioned in the previous chapter. For example, retargeting ads can prevent customer churn and directly contribute to increasing LTV. The advertising effectiveness metrics that need to be measured differ across each phase of the AARRR model.

By leveraging this model, it becomes possible to optimize advertising investments across the customer lifecycle and develop an integrated strategy for achieving sustainable growth without fixating on one KPI.

Conclusion: Elevating Business to the Next Stage with New Era Advertising Effectiveness Measurement

This article has introduced five crucial perspectives that overturn conventional notions of advertising effectiveness measurement.

1. Look at ROI, not just ROAS: Evaluate advertising results based on final profits, not just sales.

2. Measure asset value with brand lift: Visualize the medium- and long-term contributions of ads that are not clicked to the brand.

3. Obtain objective evidence with behavioral lift: Prove advertising effectiveness with actual "behavior" data like searches and purchases.

4. Evaluate long-term value with LTV: Make investment decisions based on customer lifetime value rather than being swayed by short-term CPA.

5. Capture the whole picture with the AARRR model: Define the role of advertising across the entire customer lifecycle and optimize KPIs.

The future of advertising effectiveness measurement must integrate short-term performance with long-term brand building and take a data-driven approach to optimize the entire customer lifecycle.

However, such complex and multi-faceted analysis and optimization can take an enormous amount of time if done manually. Integrating data from multiple advertising channels, and analyzing cross-functionally from ROI to LTV to brand effects, represents a significant burden for many marketers.

Therefore, a new solution utilizing AI is demanded. "Cascade" is precisely the "AI agent for advertising operations" developed to solve this challenge. AI automatically integrates and analyzes data across multiple channels, offering insights on where to increase budgets and which campaigns are likely to succeed. It supports optimizing budget allocation.

If you want to drastically reduce analysis workloads and focus on data-driven essential decision-making, please consider Cascade.

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