The acronym POAS stands for Profit on Ad Spend. Simply said, it calculates how much money you make from advertising dollars, pounds, euros, or yen. While there are some similarities between the two, there are also significant distinctions. There are tremendous benefits to overlaying and optimizing towards a POAS metric.
How does POAS contribute to the success of your performance marketing?
Poas marketing delves deeper into the numbers while still providing a summary of campaign success. We believe that by setting the correct goals, you may win a big portion of the battle for long-term success. This has the following consequences for e-commerce businesses:
- Reporting that is accurate and based on data.
- Transparency for all parties involved.
- Product-level optimization is more effective.
When does the use of POAS become a constraint?
Without an evaluation of the constraints, no marketing hypothesis would be complete. Depending on your objectives, POAS may be less useful. If you’ve determined that new client acquisition is the most important factor in long-term success, then switching to POAS won’t help you. The same may be said for public awareness campaigns. It’s all about a direct response in POAS. POAS will also be less useful to e-commerce firms with little variation in profit margins; if you only have one product or know all products have a 20% margin, you can easily keep track of profits. The goal of POAS is to manage fluctuating margins.
Finally, POAS does not account for everything. For high-end fashion brands, for example, marketing may account for a large portion of the cost of a product. It’s impossible to estimate a profit margin for a certain handbag or celebrity collaboration because the cost of manufacturing isn’t the only factor to consider. Nonetheless, we value control and transparency, and this moves us a step closer to achieving those goals.
Regardless of whether you operate in the premium sector or sell a wide range of low-cost products at scale, POAS should be top of mind for e-commerce firms.
It allows us to optimize toward and maximize earnings by providing improved reporting at both the granular and topline levels. It’s a model we’re recommending to the majority of our clients as long as it aligns with their business objectives. POAS is most suited to brands with low margins and big product volumes, where the goal is to maximize profit from a wide range of products. We set up automated trackers that indicate cost and profit per product, allowing us to maximize profits and control spending at a finer level.
Secondary to that, it’s useful if your profit margins are highly variable. If you have a low-cost range that is highly sought, you want it to carry more weight on a product level than one that is less profitable. From there, we use hourly bid optimization and custom-built scripts to optimize POAS. The data is then used to inform both our targeting and strategies, ensuring that our clients get the most out of their marketing.
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