Evaluating Customer Acquisition Cost and ROAS Trends Over Time

Acquisition > Return on Ad Spend > Trend

Summary

The Return on Ad Spend (ROAS) Trend report helps you track the efficiency and profitability of your ad campaigns over time by comparing how much you’re spending on digital ads to the revenue generated from new customers.

Questions the report answers

• How much does it cost to bring in new customers?
• How much return we’re getting from our digital ad spend?
• How are CAC and ROAS trending over time?

How to read the report

Evaluate Your Ad Efficiency with CAC and ROAS

• High ROAS with Low CAC: This is the ideal situation. You’re acquiring new customers at a low cost, and the return on your ad spend is high. This means your campaigns are highly efficient.
• Low ROAS with High CAC: This suggests inefficiencies in your ad campaigns. You’re spending more to acquire customers than you're getting back in returns. You may want to re-evaluate your targeting, ad content, or channels.
• High ROAS with High CAC: While you're getting a good return on your ad spend, the cost of acquiring those customers is high. Consider optimizing your campaigns to reduce CAC without compromising on ROAS.
• Low ROAS with Low CAC: Although you're not spending much to acquire customers, you're also not seeing a significant return on that spend. This could indicate that the quality of customers being brought in through your ads is low.

Track metric trends

• An increase in CAC over time may indicate that your customer acquisition strategies are becoming more expensive. If your ROAS is trending downward, it means you’re getting less revenue back from each pound spent on ads. Investigate your ad campaigns for potential areas of improvement.

Understand the relationship between Digital Ad Spend and New Customer Orders

• High Ad Spend, Low New Customer Orders: If you’re spending a lot but not seeing a corresponding increase in new orders, it may indicate that your targeting is off, or your messaging isn’t resonating with potential customers.
• Lower Ad Spend, High New Customer Orders: This is a good sign. It indicates that your ad campaigns are performing efficiently, and you’re bringing in a high number of new customers for less money.

Glossary

Digital Ad Spend

The total spend on advertisements across all advertising platforms. It is calculated by summing the costs associated with each ad platform.

New Customer Orders

The total number of orders placed by New Customers. It is calculated by counting the orders by New Customers.

Customer Acquisition Cost (CAC)

The cost associated with acquiring a new customer through advertising efforts. It is calculated by dividing the total ad cost by the number of new customers.

New Customer Average Order Value

The average amount spent per order by customers making their first purchase. It is calculated by dividing the total sales amount from new customers by the number of orders placed by those new customers.

New Customer Order Amount

The total revenue generated from customers who are making their first purchase.

Return on Ad Spend (ROAS)

The revenue generated for every dollar spent on advertisements across all advertising platforms. It is calculated by dividing the total ad revenue by the total ad cost.