We Won the Battle of ROAS, But We Almost Went Out of Business

ROAS is like a drug.

And for way too long, I was addicted.

We loved the ego boost we got when we’d see our ROAS go up.

And, over time, we’d have to work harder and harder to see any improvement in performance.

So we worked even harder and invested more resources.

Looking back, I realized that the “prize you win” (AKA fundamental impact on your biz) for getting really good at paid social direct response was not a prize we wanted to win.

At Chubbies, I think we got really, really good at performance marketing, and we thought that was our game.

And I think we got pretty good to where we won that game.

And then once we won it, we realized that that was not the game we wanted to win.

And why is that?

It's because of the negative externalities of winning that prize.

Or put differently, the fundamental business impact was completely disconnected with what we actually wanted to create in our business.

Specifically, as we looked at traffic sources of our new customer revenue, we saw that paid was becoming an ever increasing percentage, which is the opposite of what we wanted.

When we’re building a brand, we realized it was 10x more important for our ad spend to drive as much new customer acquisition as possible to manifest in those unpaid buckets or the owned and organic channel buckets.

And so when we saw that going the opposite direction while we were, air quotes “winning the game of performance bottom funnel conversion marketing”, that, for us, was a total mind blower.

We thought we won, but we actually totally lost.

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To leave you with something you can tactically apply today, here are two ways we updated our thinking about how we think about the objective of every dollar we spent:

1) Maximum incrementality

We learned we could turn off lots of spend and nothing would happen to our business. We learned ROAS is in direct opposition to incrementality. And, because it’s sooooo enticing to grow ROAS, I lost focus on incrementality for too long. I can tweet a ROAS screenshot. I can’t tweet the results of my incrementality analysis.

2) Drives people to purchase in ways that show up as coming from ‘unpaid’ traffic sources

Not at the beginning, but as we learned what was most important (not ROAS), for all of our creative across top, middle and bottom of funnel we aimed to have the impact of changing the way people think about Chubbies. Then, the behavior we intended to drive in our audience was that whenever they decided they needed shorts, they wouldn’t go through a logical process of comparing price, features, fabric content, etc across multiple shorts providers. They would simply think “I need shorts; I buy Chubbies”.

When that happens, people google your brand or they enter your url in their browser, and then they purchase.

And, because they’ve learned to connect Chubbies as the go-to provider for that particular need, they are also more likely to come back in the same way over and over.