What’s the difference between marketing ROI and ROAS? How to measure both

Kelsey Formost

12 Oct 2021 · 3 min read

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Measuring the success of your influencer marketing campaigns can happen in many different ways, and yet it’s one part of the process that many marketers struggle with.

There are many extremely valuable results of influencer partnerships that don’t naturally lend themselves to numerical data measurement; word of mouth, establishing brand values, thought leadership, share of market voice, and brand awareness, to name a few. But when it comes to measuring the value of influencer partnerships compared to the rest of your marketing spend, it’s actually easier than you think!

Today we’re going to be exploring the differences between two popular ways to measure the success of an influencer marketing or social media marketing campaign: ROI, or “Return on Investment”, and ROAS, or “Return on Ad Spend”.

The Basic Definition of both terms are as follows:

ROI: Return on Investment

When calculating the ROI of a campaign, you first need to set your brand or client’s KPIs. Click here to read our recommended 5 KPIs every marketer should set before running a campaign. Many marketers make the initial mistake of thinking ROI only applies to the monetary return, when in fact, ROI is more of a holistic look at the ratio between your investment and the benefits you reap.

The “investment” part of ROI is about more than just the amount of money you spent hiring an influencer or running an ad. ROI is affected by additional costs like time, staff, resources, and energy. For example, if it takes a team of four people weeks to do market research, plan a campaign, do manual talent discovery, generate creative assets, send contracts and payments, and track results, that campaign has a high investment for your brand, and therefore will generate a lower ROI. Conversely, if it only takes one person a day or two to execute the same things with the right technology or platform, your brand’s investment is much lower, making your ROI higher.

When it comes to understanding the overall benefits of the campaign, again it’s very important to have set the KPIs that you care about most. Only then will you be able to see if that campaign under- or over-performed according to your goals.

ROAS: Return on Ad Spend

Return on Ad Spend is a metric that measures the ratio of how much revenue was generated per dollar spent on a social media campaign. For example, if a brand spends $100 hiring an influencer and they generate $500 in sales, that campaign had a 5:1 ROAS.

Now, it may seem from this definition that ROI and ROAS are the same thing, but here’s where the true difference lies: ROAS measures the results of a specific campaign whereas ROI takes the larger picture into account. ROI considers all the additional benefits in addition to the actual revenue for a specific post or partnership.

Where ROI is holistic, ROAS is specific. The reason it’s helpful to measure both is that ROAS allows you to compare the success of specific influencers or campaigns against one another to see which were more or less effective than others and why. This in turn helps you make better investment decisions for the next time around!

No matter which you’re measuring- ROI or ROAS - you’ll need to make sure you’ve set up pixel tracking and UTMs with your influencer campaigns to ensure you’re seeing where attention and revenue are being generated.

Don’t forget to consider your Conversion Rate

While ROI and ROAS are both excellent markers to keep track of, it’s extremely important to take your campaign’s unique conversion rate into account.

Before you run your campaign, you first should decide what the desired action you want your audience to take will be. Do you want them to purchase an item? Sign up for an email list? Follow your social media profile? Use a hashtag or discount code? Whatever the desired action is, determine it ahead of time so you can measure how successful your campaign was beyond revenue.

So much of campaign measurement comes down to determining KPIs ahead of time, then making it easy on yourself and your team by choosing the right technology partner to keep track of it all. If you’d like to know how Tagger’s end-to-end influencer marketing platform helps marketers automatically pull in real-time campaign data to generate beautiful modular reports in minutes, request a demo here!

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