By focusing just on return on ad spend (ROAS) you can lose track of the big picture. Kathleen Booth stressed the importance of net margin contribution instead, which enables you to see the overall profitability. Especially in marketplaces, it’s critical to figure out which products are bringing in the most revenue overall, which products are falling short, and which ones are loss leaders that bring in new customers.
We chatted with Kathleen Booth about the metrics eCommerce brands should be measuring to be able to know where to invest, the tools that can help them achieve that, and the proper internal organizational structure that is required to succeed online.
We covered off a lot in this episode, so if you have half an hour, it’s worth your while to listen to the full recording. If not, we’ve got a short teaser for you below and a summary of the three main points that stood out:
- Challenges brands are facing with data
- Internal communication and organization needed for success
- Metrics beyond ROAS
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Who are Kathleen and Grace?
Kathleen Booth is the Senior Vice President of Marketing at Tradeswell, which provides an operating system for eCommerce brands. She’s working to empower a new generation of online-native marketplace brands. In addition to her work there, Kathleen hosts the Inbound Success Podcast and had TopRank name her among the Top 50 B2B Marketing Influencers of 2021.
Grace Mercer, Account Manager at Optily, also joined the conversation. With years of experience in marketing for a variety of brands, she now advises eCommerce brands with long-term growth strategies through online marketing.
Challenges in eCommerce data
Last year, Kathleen and her team conducted a survey with over 300 eCommerce leaders and identified some common difficulties across the industry.
The first major challenge for brands is the speed at which digital marketing happens. We’re not talking about the constant changes in policies and rules from the major platforms here–although that has been a big theme on the show. What Kathleen brought up was the fact that everything is algorithmically driven. From placements to auctions and frequency–almost everything is going at speeds that humans simply can’t keep up with.
In a real-time marketing world, it’s becoming increasingly important to have quick access to accurate data to be able to make decisions and optimizations regularly, if not instantaneously, to ensure profitability.
This brings us to the second point, which is that it’s incredibly difficult to match up data across different platforms. Bringing in your Amazon data, Google Ads data, and Shopify sales metrics oftentimes is just apple and oranges. Having a system in place that unifies this data is key to making sense of it. Tradeswell is one of these solutions that provides an AI-powered checklist for these actionable insights. When it come to adjusting ad spend, Optily is another tool that helps in the real-time economy.
Marketing can’t be successful in a vacuum. With online brands, it’s critical to have internal alignment across departments and avoid siloization.
As you can see from Kathleen’s example, it’s critical for marketing to be in constant contact with operations, fulfillment, finance, and customer support to ensure everyone is aligned on the strategy and profitability.
Curiously, Kathleen mentioned that it tends to be bigger, more well-established brands that tend to struggle more in the pivot to online retail. Smaller, digitally-native brands start of nimble and focused on online growth, while brick-and-mortar brands that are moving into eCommerce have to do more internal realignment to adjust their structure and operations.
Metrics beyond ROAS
ROAS has long been a Northstar metric in marketing, but Kathleen discusses how it’s important to not look at it in isolation. While it can be an indicator of success, it shouldn’t be seen as the end-all be-all metric.
Reorient your business now to look at overall profitability, cash runway, and individual SKU profit and loss. This will ensure you’re getting the full picture of your company’s growth potential over time. With the current inflation and economical uncertainty looming, this is how Kathleen suggests businesses prepare to weather the storm.