We are excited to announce the debut of our new Repeat Purchase Return on Ad Spend (ROAS) widget within the Pacvue Product Center. This feature expands upon the basic ROAS methodology (ROAS=Ad Sales/Ad Spend), which only factors in the purchase that results from an ad click within the 14-day attribution window and takes it a step further with an entirely new metric called “Repeat Purchase ROAS” that considers the annuity value (or revenue from repeat purchases).
What we already know is that in the consumer-packaged goods (CPG) category, shoppers will often buy the product more than one time. This makes sense since consumers consume the product and eventually run-out and need more. The hope is that consumers will return to buy your product again. In CPG categories (especially those with high household penetration such as toilet paper or laundry detergent), shoppers will very likely buy a product from your category again. Brands know this and want to capture shoppers as they enter the category or shift channels from offline to online.
What’s important is to fully understand the impact of ad spend when making budgeting decisions. From a financial perspective, brands want to understand the lifetime value of a shopper since that will enable them to assess how much they’re willing to pay to acquire a shopper. Since the competition to win new shoppers can be intense, the investment for a one-time purchase might not necessarily look that positive; however, when you factor in the annuity, that initial investment can look more attractive in winning shoppers.
How Can Brands Use This Information?
Brands can use both metrics to assess the financial health of their paid search investment. Basic ROAS is useful to evaluate the immediate financial implication of their ad investment. Basic ROAS can be used to make regular optimizations at highly granular and tactical level (i.e., keyword or product level). Meanwhile, Repeat Purchase ROAS can be used to evaluate the long-term efficacy of your ad investment to drive customer loyalty and operate a financially viable business. The idea is that Repeat Purchase ROAS should guide your strategy since it is not something you should necessarily monitor every day. It should be a directional metric to assess whether your long-term investment is above water.
Like many Key Performance Indicators (KPIs)/metrics, ROAS in isolation is crude and can be manipulated (shift toward branded keywords = higher ROAS, but less incremental for the total business). Using repeat purchase ROAS adds crucial context to explain the impact of your strategy, same as New-To-Brand (NTB) % or click-through-rate (CTR) can be used to augment other metrics to create a fuller picture.
At the end of the day, brands win when they can acquire a new user but then not have to continually pay and invest in keeping that consumer buying their products. This is the ideal scenario for brands since that frees up investment to continue growing their consumer base and lock more shoppers into their brands and products. Brands know that this is only part of the challenge – they must deliver products that meet the shoppers value expectations in terms of performance and price.
Brands also know that humans are creatures of habit and will often continue buying a product just because that’s what they have done before, but moments of change for consumers can be a crucial time for brands. Whenever consumers have major changes in their lives (buy a house, get married, have a kid), they are more likely to change their previous consumption behaviors. This is when brands have a good chance at getting a new consumer to try their product, and our new Repeat Purchase ROAS will help brands evaluate whether their investment in going after that shopper is profitable.
Interested in learning more about Pacvue’s enterprise platform for eCommerce advertising, sales, and intelligence? Request a free demo today to see how the new Repeat Purchase ROAS widget can help your brand understand the impact of ad spend when making budgeting decisions and drive more repeat purchases.