Maximizing Advertising Efficiency with ROAS for Degusta Box
ROAS is the better choice for the following reasons: ROAS measures the efficiency of advertising by comparing the revenue generated directly from ad spend. It answers the critical question: How much revenue do we earn for every euro spent on advertising? ROAS is particularly valuable for businesses seeking to evaluate and optimize their digital ad performance in specific campaigns or channels. Degusta Box’s business model, data, and objectives indicate that short-term performance optimization, particularly in customer acquisition through digital ads, is crucial at this stage.
Additionally, Degusta Box relies heavily on digital marketing and paid media to generate leads and drive subscriptions. Their Average Cost per Acquisition (CPA) for social media ads is €12, and the monthly subscription price is €15.99. Using ROAS will allow Degusta Box to determine whether the revenue generated from ad campaigns justifies the advertising costs and which platforms are the most effective. This is essential for optimizing the advertising budget to drive immediate results.
Moreover, the provided data highlights performance issues in the Awareness and Decision stages of the funnel, such as:
- A 60% bounce rate on the website.
- Low social media engagement rates (e.g., Instagram at 1.2%, TikTok at 3%).
- A high cart abandonment rate of 70%.
These metrics suggest inefficiencies in converting traffic from paid campaigns into subscriptions. ROAS provides a direct evaluation of how ad spend contributes to conversions and revenue, enabling Degusta Box to identify underperforming campaigns and refine strategies to increase efficiency.
Finally, Degusta Box’s promotion strategy heavily emphasizes social media ads and influencer collaborations. With a monthly subscription model, the return on each ad campaign can be closely tracked against the revenue generated in the first month or two. ROAS allows for precise targeting and optimization of these digital campaigns by identifying which platforms (e.g., Instagram, TikTok) deliver the highest returns, improving ad placement decisions.
In Conclusion: While ROI is a powerful metric for evaluating long-term profitability, it may not be the most effective tool as ROI incorporates a variety of costs beyond advertising (e.g., logistics, product procurement, and customer service). Degusta Box’s immediate need is to evaluate and optimize its advertising spend, not its overall business profitability. Therefore, for Degusta Box, ROAS is the better option because:
- It provides immediate insights into the effectiveness of specific ad campaigns.
- It aligns with the short-term goal of increasing subscriptions by optimizing ad spend and improving the digital funnel.
- It offers actionable data to reallocate resources toward the most profitable advertising channels and tactics.
1. SEM (Search Engine Marketing) Why: Google Ads allow Degusta Box to capture high-intent users searching for terms like “monthly food subscription box” or “try new food products”. Execution: Create targeted ads with keywords like “monthly food box,” “discover new snacks,” or “best food subscription services.” Use Google’s Display Network to show banners to users browsing food-related blogs or websites. Customer Journey Phase: Awareness and Decision. KPI Measurement: Click-Through Rate (CTR), Conversion Rate (subscriptions), Cost per Acquisition (CPA).
2. Social Media Ads Why: Social media platforms are highly visual and ideal for showcasing the surprise and delight elements of Degusta Box. TikTok offers high engagement potential among younger audiences. Execution: Instagram/Facebook: Carousel ads showing past box contents with CTAs like “Subscribe Today.” TikTok: Use promoted videos highlighting the unboxing experience. Partner with influencers to create authentic, engaging content. Customer Journey Phase: Awareness and Consideration. KPI Measurement: Engagement Rate (likes, shares, comments), Follower Growth, CTR to the website.
Email Marketing Why: Email is a proven tool for nurturing leads, converting subscribers, and retaining customers through personalized recommendations and promotions. Execution: For leads: Send welcome emails with an offer (e.g., 20% off the first box). For subscribers: Use remarketing emails to reduce churn, like personalized content based on past boxes or reminders for Limited Edition boxes. Customer Journey Phase: Consideration and Retention. KPI Measurement: Open Rate, CTR, Churn Rate Reduction.
4. Remarketing: Why: Remarketing allows Degusta Box to re-engage potential customers who visited the website or abandoned their carts. Execution: Ads: Serve banner ads with discounts to users who abandoned their cart. Email: Use personalized offers to remind users to complete their purchase. Customer Journey Phase: Consideration and Decision. KPI Measurement: Cart Abandonment Rate, Conversion Rate.
5. Influencer Marketing Why: Influencers, especially micro-influencers in the food niche, bring authenticity and trust to the brand while targeting niche communities. Execution: Collaborate with influencers to create content like unboxing videos or recipe inspiration using items from Degusta Box. Leverage branded hashtags like #DegustaSurprise to encourage UGC. Customer Journey Phase: Awareness and Consideration. KPI Measurement: Engagement Rate on influencer posts, Website Traffic from influencer campaigns, Subscriptions attributed to influencer codes.
6. Website: Why: The website serves as the primary platform for driving subscriptions, educating potential customers, and supporting existing subscribers. Content: User-friendly design, clear calls-to-action, optimized subscription pages, FAQs, and blog content to drive organic traffic. Customer Journey Phase: Awareness, Consideration, Decision, and Retention. KPI: Website Visits, Conversion Rate, Bounce Rate, Average Time on Site, and Churn Rate.
7. Affiliate Marketing: Why: Helps expand Degusta Box’s reach through performance-driven partnerships. Partner with food bloggers and subscription review sites to promote Degusta Box via affiliate links, offering commission on every subscription. Customer Journey Phase: Awareness and Decision. KPI: Traffic from affiliate links, Subscriptions generated, Cost per Acquisition.
8. User-Generated Content (UGC) Why: UGC strengthens brand trust by showcasing real customers enjoying the service. Content: Promote a branded hashtag (e.g., #MyDegustaSurprise) and incentivize subscribers to share their unboxing moments in exchange for a chance to win a free box. Customer Journey Phase: Awareness, Retention, and Advocacy. KPI: Hashtag Mentions, UGC Posts, Customer Retention Rate, and Engagement Rate.
9. Customer Referral Programs Why: Leverages word-of-mouth marketing, one of the most effective forms of customer acquisition. Content Strategy: Implement a referral program where existing customers receive a discount or free box for every friend they refer. New subscribers also receive a first-box discount. Customer Journey Phase: Awareness, Advocacy. KPI: Number of Referrals, Conversion Rate from Referral Traffic, Churn Rate Reduction, Customer Acquisition Cost (CAC).
10. Local Events and Sponsorships Why: Participate in or sponsor local food festivals, markets, or community events to raise brand awareness and connect with potential customers. Content: Set up booths to offer samples, sign-up promotions, and exclusive event discounts. Customer Journey Phase: Awareness and Consideration. KPI: Number of Sign-Ups at Events, Brand Awareness Surveys.
ROI: Degusta Box operates a subscription-based model, where long-term customer relationships are vital. Their goals include reducing churn, increasing Customer Lifetime Value (CLV), and improving conversion rates. Here’s why ROI is more suitable for analyzing their performance:
1) Subscription-Based Model:
The success of Degusta Box isn’t just about short-term revenue but about retaining customers over time. Metrics like CLV (€95 per customer) and churn rate (currently 5% per month) are central to their profitability. ROI allows Degusta Box to factor in these long-term financial benefits and evaluate whether campaigns are sustainable in generating profitable growth over the customer lifecycle.
2) Funnel Optimization Goals:
Degusta Box is working to reduce cart abandonment (currently 70%) and increase the website conversion rate (from 2.1% to 5%). These improvements impact not only immediate revenue but also long-term customer retention and profitability. ROI can account for the broader impact of these changes across the entire funnel, from awareness to retention.
3) Broader Cost Analysis:
Unlike ROAS, which only considers ad spend, ROI evaluates all costs, including subscription management, product procurement, logistics, and marketing expenses. For instance, while ad campaigns may show a positive ROAS, the ROI might reveal that overall profitability is compromised due to high operational costs or low retention rates.
ROAS would be appropriate if Degusta Box’s focus were on short-term decisions, such as evaluating the performance of specific advertising platforms (e.g., Instagram vs. TikTok) or determining which campaigns are generating the highest immediate revenue. While this is useful for optimizing individual ad campaigns, it doesn’t account for the full cost structure or the long-term value of subscribers, which are critical in subscription businesses like Degusta Box.
ROI (Return on Investment):
- Measures the profitability of an investment by comparing the net profit to the cost of the investment.
- Purpose: It helps determine whether campaigns generate a positive or negative return.
ROAS (Return On Ad Spend):
- Measures how much revenue is generated for every euro spent on advertising.
- Purpose: It evaluates the effectiveness of ad spend in terms of direct revenue.