Return on Ad Spend (ROAS) has been the go-to metric for measuring success in digital advertising, but is it actually holding your business back? In this episode, we break down why traditional ROAS is misleading, how agencies manipulate data to appear successful, and what you should be focusing on instead. John Moran joins the conversation to discuss the metrics that actually drive growth, including Media Efficiency Ratio (MER) and New Customer Acquisition Cost (NCAC). Learn how to shift your marketing strategy to prioritize long-term scalability and profitability, rather than short-term vanity metrics.

Chapters:

• 00:00:00 – Welcome to Perpetual Traffic: Why This Episode is a Must-Listen
• 00:00:17 – The Episode That Changed How Marketers Measure Success
• 00:00:55 – The Truth About ROAS: Why It’s Holding Your Business Back
• 00:02:00 – John Moran Joins Tier 11: A Game-Changer for Performance Marketing
• 00:03:47 – From Google Ads Expert to Growth Strategist: John Moran’s Evolution
• 00:05:21 – The Fatal Flaw of Single-Channel Agencies
• 00:06:57 – Why a Client-Centric Approach Beats Platform Metrics Every Time
• 00:14:02 – How Marketing Measurement Has Been Broken for Years
• 00:16:54 – The New Marketing Strategy That Actually Scales Businesses
• 00:25:20 – The Secret to Aligning Teams for Maximum Growth
• 00:27:13 – Why Most Agencies Won’t Survive the Next Marketing Shift
• 00:28:02 – The Role Agencies Should Play in Growing Your Business
• 00:29:41 – The Future of Marketing Metrics: What You Need to Track Now
• 00:33:13 – Real-World Case Studies: How to Fix Your Marketing Measurement Today
• 00:43:45 – Final Takeaways and What’s Coming Next

LINKS AND RESOURCES:

• Tier 11 on YouTube
• Get Your Marketing Performance Indicators™ Checklist Now!
• Tier 11 Jobs
• Perpetual Traffic on YouTube
• Tiereleven.com
• Mongoose Media
• Perpetual Traffic Survey
• Perpetual Traffic Website
• Follow Perpetual Traffic on Twitter
• Connect with Lauren on Instagram and Connect with Ralph on LinkedIn

Thanks so much for joining us this week. Want to subscribe to Perpetual Traffic? Have some feedback you’d like to share? Connect with us on iTunes and leave us a review!

Mentioned in this episode:

Tier 11 Data Suite

AppSumo – 13% off with code traffic13

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Read the transcript below:

(Part 1) Why ROAS Sucks: The New Marketing Metric Everyone Should Use…But Aren’t

[00:00:00]

Ralph: You’re listening to perpetual traffic.

Ralph: Hello and welcome to the perpetual traffic podcast. This is your host, Ralph Burns and the founder and CEO of tier 11. And today’s show, we are going to get into, , some of the most important stuff that we discussed here in the last year, and because this show appeared about a year or so ago, there’s probably a lot of you who are new listeners who have not listened to it.

Ralph: And so we are bringing it. Back because it is one of the most, if not the most downloaded show that we’ve ever produced here so much so that it actually came into the top three of podcasts for about three weeks, , about a year or so ago. And it’s especially relevant with a lot of the things that we’re discussing here on perpetual traffic, which is.

Ralph: The metrics that you’re using in order to measure success in your online marketing right [00:01:00] now, and particularly around one metric, which I know a lot of you still rely on because I’ve been on multiple client calls in the last week, and it’s especially relevant even today is return on ad spend. Or row as it used to be the number one metric that we would look at inside all of the individual platforms.

Ralph: And that includes Google as well as meta. We don’t look at it anymore. We use it as a secondary or tertiary metric. Think about it as way back in the day, you would look at row as or CPL cost per lead CPA cost per acquisition as your number one metric to determine success inside the platforms. And then you would use maybe cost per click or click through rate as secondary metrics.

Ralph: We now use ROAS as a secondary metric. Is it an important metric? Yes. It’s still important. However, it’s not the most important thing because the most important thing that we look at now well, we’re going to discuss it here today. And you can probably guess what it is. So without further ado, let’s get into today’s episode with John [00:02:00] Moran.

Ralph: This is the first show we actually did with him after he joined tier 11. And we have been talking about the same stuff in various incarnations over the last year, we’re now starting to see the market shift more towards these metrics that matter

Ralph: to produce growth, that scales, we also get into Murr, how to use media efficiency ratio, as well as why ROAS specifically is the wrong metric. And like I said, the one metric that we now use to determine it’s our North star. It’s the most important metric that we scale and grow businesses. And today’s episode explains it in deeper detail.

Ralph: So without further ado, let’s get into today’s episode of the two part series here, myself and John Moran, take it away, boys,

Ralph: Hello and welcome. You’re listening to the

John: perpetual traffic podcast is the show where we don’t talk about government corruption because I’m behind on my taxes and we do talk about performance marketing. Yeah,

Ralph: that’s

John: good.

Ralph: Well,

John: I’m Ralph Burns, [00:03:00] founder of tier 11 and I’m john Moran.

John: I’m actually a new person here at tier 11, which is actually something we’re gonna be talking about today.

Ralph: Yeah, we’re pretty excited about this one. There’s our scripted intro. For those of you who are listening, we’re not going to be scripted here at all today because we have. John Moran who is as many of you probably know have been on this show I mean, I think probably more so than any other guest host and as Qasim is in, I don’t know where he is I think he’s in either Argentina, Venezuela, Bolivia, Colombia He’s somewhere.

Ralph: He’s somewhere. He’s somewhere south. Yeah, which is great because we had the opportunity to get John on the show here this week and John has teamed up with Tier 11, and we are very, very excited about that. We’ve been on the show as the Solutions 8 guy, as a Google guy for a number of years, and obviously we’re going to be doing some tactical Google stuff here today, but I think probably the listeners might want to know a little bit more about [00:04:00] how this whole thing evolved.

Ralph: What happened? Why is John Moran, the John Moran, as he’s known in many, many circles, as a Google guy, which is a misnomer. You’re going to be talking more about that here today, but how did it evolve so that you ended up joining forces with us at tier 11?

John: Yeah, yeah. It’s kind of like the next origin story, I guess, but yeah, so I was obviously everyone knows if you’re familiar with costume that I was his business partner for many years and him and I went through a successful acquisition of our company.

John: And one of the things that I think has always kind of hamstrung us in really being able to move the full needle. for a business, not just necessarily the Google portion is because we were just Google ads agency. And I am known as the Google guy. That’s just because I chose the one that was harder.

John: Google ads is the paid media source. I believe it’s Google ads is more complicated than meta just as a whole. And I probably just pissed off probably like 40, 000 people listening right now, [00:05:00] but more just like the details inside of instead of Google ads because Google tricks. People more often than helps, so I made it kind of my focus on Google ads, but I do know about a pretty well tick tock linked in, so I know CEO.

John: We used to be an SEO agency cost when I was many, many moons ago, so I have a really good understanding of all of the aspects of paid and non paid media. We couldn’t ever really move the needle outside of Google Ads because we were a Google Ads agency. I mean, all of our leadership team, our tactics, our SOPs, our employees, everything was Google Ads.

John: And then we have to like, help the meta teams if there was a underperforming meta team with our clients. And then help the CRO person, then help the email person, then help the SEO person. And now we’re wearing a bunch of different hats, but paid as one. And when We’re looking through all the clients that we necessarily have scaled over the years.

John: It was when we had, we were almost acting like a surrogate CMO. And so that’s where I think that when you can take control of a company’s narrative and traffic [00:06:00] and five layers above what maybe an individual agency might be looking at in app, you actually can see the forest for the trees. So tier 11 does all that though.

John: Tier 11 does use all aspects of a business from a paid and non paid marketing perspective in order to really move the needle. Ralph, what you’ve been doing is creating kind of a client. Centric, we call it client centricity, but client centric agency was excited for me because I was getting ready to go on like an anti agency rant just because we bonded over that.

John: I think initially, yeah, yeah, I was like, I’m going full force of agency suck and I still hold that to be true. And that’s when you’re like, well, we’re not an agency anymore. I’m like, that’s it because agencies do suck. 99 out of 100 probably more 999 out of 1000. Probably they do. They just look at their own individual metrics.

John: trick a person who doesn’t know any better at the company that was hired to hire them. And it just goes round and round. It does that for the last decade. So I think that’s why I’m excited to be here, is being able to [00:07:00] really, when I say move, I don’t mean just make the ROAS go up, but actually grow the client’s bottom line.

John: That is the bottom line.

Ralph: Yeah, and I think this is a hard thing, I think, for a lot of our listeners to wrap their head around because there are a lot of business owners that listen to this show. There’s a lot of agencies that listen to this show. And. If you haven’t joined our Telegram group, there’s a fair amount of agencies that are in there.

Ralph: ProfessionalTraffic. com forward slash Telegram. We’re going to get John in there too, but you’ll be deluged with the questions, so be kind. He only has so many hours in the day. Point is, is that group is a great group because it’s going to be real time input from you, the listener, as to how we can change the narrative on this show.

Ralph: And the interesting thing, I think I posted this yesterday, is that traffic is the least important component of performance marketing. Right now, in a lot of ways, the strategy that goes along with that is still as important, if not more important. And you do that through multi channel. But at the end of the day, when an [00:08:00] agency is employed by a business, they are there to grow that business.

Ralph: But also to really understand that business and we’ve had clients leave us and I know Solutions 8 has had this same challenge, even if you’re hitting the KPIs and hitting the metrics, performance marketing is one part of it. That’s why we say, you know, we’re in this sort of this new realm of how you actually deal with.

Ralph: This agency model. And I think the agency model right now, as it currently exists, this fee for service plus percentage of ad spend is wrong because it’s all product based. It’s all like individual silo based. Hey, I’ll sell you Facebook. Hey, I’ll sell you Google. Hey, I’ll sell you SMS. Hey, I’ll sell you email.

Ralph: Well, who’s the one who’s bringing it all together and looking at it from. I hate the 30, 000 foot view cliche in business, but it’s true. And this is what you do. You were not able to do [00:09:00] this for multi channel and control each individual channel working at Solutions Aid, even though it’s a great organization, super talented people, obviously Costoms a long time will always be a friend of both of ours, business associate of yours for so many years.

Ralph: Point is, is like that was one tool in the toolbox. I mean, in order for an agency to really survive, it’s not like you want to become this massive multi channel multi platform power digital, not anything against those guys. Cause they’ve built a tremendous business, but it’s like, it’s not just about controlling all the channels.

Ralph: It’s about looking what’s most important to the client and what the client really cares about is performance of where the needle is being moved inside their CRM or where the money is actually captured. But also. The agency needs to form a partnership so that they are working alongside and helping them to achieve their goals and getting to really understand them.

Ralph: And that’s one of the [00:10:00] things you do so well, which is one of the reasons why we’re so psyched to have you on board with us.

John: Yeah, I’m psyched to be here. And you know, it’s funny looking back. I don’t regret building just a Google ads agency. It evolved into something I wasn’t expecting. What I mean by that is we measured our Google ads success based on the business health.

John: So when I do a client update call just for Google ads, I will hop into the back end of their Shopify measure. all customers versus new customers. Development and CAC identify what the end mirror was the new media efficiency ratio. Compare that against LTV. Look at profitability, hop into lifetime. I mean, we did all that.

John: The problem was is you’d have an agency that was managing meta that is measuring in app row as making probably not smart decisions each day that we just couldn’t control. And we’re like, can they please stop doing X, Y and Z? This is hurting us Google ads in app. is moving in the right direction for all non brand search terms.

John: I can see in the back end that we do have some attribution of those [00:11:00] customers because attribution sucks, but we do see that as bringing us good stuff. But then I see Meta doing 5, 000 per day out of a 10, 000 per day budget in remarketing of a person that’s already bought. That’s never going to come back again.

John: And now our spend is off. And it’s like, can you please stop, you know, tell them not to do that. So where we measured in the backend for Google ads, we saw great performance. And when we were the only channel for that business. It was amazing. It was great. You know, we had a hundred percent of the responsibility, but then you ultimately will need the other channels when you kind of get off your infancy stage of your business.

John: And that’s where we’re like, well, we hope you find a good meta agency. I go to tier 11. They’re good too. Yeah, I mean, that ended up

Ralph: having a very nice relationship between our two agencies, you know, which we appreciate, uh, as a referral source and still share, you know, a lot of those same customers. One of the things that always struck me about whenever we work together is you would never start like, yeah, you will do your screen shares [00:12:00] inside the MCC inside Google, of course, which we’re going to do today.

Ralph: So if you want some tactics, obviously, we’re going to get some tactics here today from john. So we’re not going to talk just all high level, of course, but you would always start with the back end, either with Shopify or the CRM or even looking at something like a North beam or a wicked reports like that’s where you get that bigger view of where am I growing the business.

Ralph: And I think that’s one of the ideas that we really bonded over when we first started talking about this potential merger, even though it’s like, all right, you’re, On tier 11, I look at this as like a merger. Like we’ve pulled you into under the tier 11 umbrella, but you’re still going to be operating as John Moran.

Ralph: Nothing has really changed there. Like we want to leverage that brilliance and have that perfade even more so within the organization, I think. That unto itself, that’s a big switch. So if you’re an agency and you’re thinking channels, you are looking at the wrong freaking thing. And if [00:13:00] you only control one channel, you only control that one aspect of the business.

Ralph: And for us, that. Is very challenging to do. Now, we still have plenty of customers that we work with either on Google or meta that, you know, they have another agency doing another thing, which is okay, but we’re moving more, more and more away from that and almost making it an imperative that we control it.

Ralph: Which is a big gamble for, we have two or three new customers and this was the pitch. It’s like, put your eggs all in one basket and trust that basket. But the point is, is like we, as long as we’re client centric, we’re moving the needle on your business. And we get what you’re trying to do. And we might not succeed all the time.

Ralph: That’s a new way of looking at things. And having spoken with a lot of other agency owners about what’s wrong in the space. There’s still a lot of them that are doing it wrong. And even the big, big, big ones, John, the ones that are the big names in our space, like just don’t get it, [00:14:00] which is okay.

John: You know, what’s funny is it’s our, it’s the agency’s fault and the client’s fault, but mostly the agency’s fault as to how the.

John: How the measurement has not progressed with real life. What I mean by that is we’ve been using agencies. We’ve been using row as for the least 10 years. Yeah, the problem is we have not kept up with social media. Dilution of that attribution or the multiple device dilution of that attribution. So when you think about 10 years ago, we didn’t, some people did.

John: So if you’re like, I had an iPad in 2012 or 2014. Great. But if you think about, like, 12 years, even like 2009, I mean, it’s been 15 years. I’m old and I have bad memory, so it’s been 15 years. That’s how we measure success is row as, but you would. Go home, you turn on your computer, you do a search and you click on an ad and tracking back then because everyone was intrusive.

John: It was like, oh yeah, I know exactly what you’ve done for the last [00:15:00] 90 days. Now, it’s social media has non click attribution. And then YouTube has non click attribution, which means, yeah, you’ve seen a Facebook ad, and then you’ve Googled something, or you’ve seen a YouTube ad, and then you’ve Googled something, and

Ralph: then you have

John: YouTube audio, which is also non click attribution, and then you have a tablet, a phone, and sometimes like two laptops, so now you have four devices that Are also when you look at attribution are going to get, you know, you’re standing in line at Starbucks on your phone, then you go home and you open up your laptop.

John: You’re like, Oh yeah, I did want to buy that. You google something. So bro as is an archaic way of measuring that has not evolved and everybody has such cognitive dissonance as to I know that YouTube works, but I’m going to measure it. You’re clicking on it, even though I bought 12 things this last year off YouTube as that I’ve never clicked on.

John: There’s a disconnect in their mind of, well, I don’t know what to do. So let’s just measure ROAS. So the individual channels are like, OK, well, cool. I just have to focus on ROAS, which means Google does [00:16:00] brand and then meta blames Google for taking all the brand and says is them. And yeah, so the way that we have not done any sort of client education as to the way to measure it, simply because I don’t think that a lot of clients know or a lot of agencies know how to actually measure good performance of omni channel marketing.

John: And so, yeah, we just have to bring everybody up to speed.

Ralph: Yeah. So how do you do that? Let’s get into the nuts and bolts of it. Because it’s inexact, you know, it’s never going to be precise. And that’s something that we’ve said many, many times here on this show. And people are like, oh, no, like, I want to measure every little thing.

Ralph: We still have customers. Like, I want to measure every penny. It’s never going to match. I’m sorry.

John: Well, I think the people that are like, no, I’m going to measure every single piece. They can switch 12 agencies before to figure out, okay, it’s me. Well, if everyone else in the room is crazy, you might be the crazy person kind of thing that will just naturally evolved.

John: I’m not worried about those people too much. They will have to get on the ship because it’s leaving kind of thing for the way that I would [00:17:00] normally measure it is is when you take a step back as using your marketing tools, which is, let’s just say Google and meta. For example, if you say, how do I do good marketing in those platforms, not how do I get good measurement from those platforms?

John: Your whole mindset changes. Is if you shut off all of your conversion tracking in Google ads and meta, I don’t actually think you should do that. That’s not what the point is. But if you were to shut off all of your measurement inside of those platforms, how would that change what campaigns you would be running?

John: And that’s where you have to kind of take a step back where, say, should I just Slap performance max on and cross my fingers. No, that’s being a bad marketer. That’s been a good measure because performance max over attributes. What would you do if this was your business? That’s where things change. You wouldn’t measure in app.

John: You’d measure. Can I feed my kids this week? Right? That’s how you measure. Then you say, well, what is it going to do? Well, I need to get the word [00:18:00] out. Aha. Maybe YouTube is a good channel. Now it’s going to look bad. Yeah. But I need to get the word out of this new, amazing wizzy wig that no one’s ever heard of performance.

John: Max can’t do that. Inbound search can’t do that. Branded search can’t do that. All of a sudden you’d take this step back. You’re like, okay, I need to work on X, Y, and Z. If I couldn’t measure that in Google, because let’s say I’m a brand new business, what would I do? And millions of businesses have been built that way.

John: But then all of a sudden millions of businesses stop measuring that way or stop trying to perform that way. So that’s where I would say is if you think about the audiences. Part where I think client centric agencies come in is because we know the platforms so well that we know what the pitfalls, the holes, and where things are going to go haywire.

John: That’s where we’re able to use the proper campaign types in those platforms in order to actually grow the bottom line metrics, not just how are they going to measure. My campaigns typically have really poor ROA as an app, and I want that. Because it means it’s cold traffic and it’s growth high [00:19:00] five, six, 800 percent ROAS means it’s warm.

John: Audiences that probably already bought from you or already been to your site three times from Meta. And now Google’s going to scoop it up. So that’s where I think is if you were to think about. If I couldn’t measure in Google, what would I actually do? We have a company that we just did a Google ads turnaround in because we looked at all their top line metrics year over year, and we saw that when Meta cut its budget in half, we only saw like a 4 percent drop in actual revenue.

John: So Meta was way overspent or Meta is going up to the wrong market or Meta is going after warm audiences.

Ralph: Or Meta is just taking credit for a view through conversion that was going to happen anyway.

John: Right. And we don’t, we don’t look at an app measurement at all. Right. We look at what are the spends versus.

John: What audiences are going after then result of what is the actual top line gross revenue? Because that will tell you if those audiences are resonating or not, whether the in app platform tracked it or not. When we look at those things, we looked at, okay, well, Meadow was cut in half because the company was not growing.

John: And that didn’t change the bottom line. [00:20:00] And then we looked at Google ads. We said, well, what’s running in Google? And it was like eight different performance max campaigns. I was like, Oh, the meta that might be driving poor traffic. We know that performance max is going to remarket that. And it was a product that doesn’t have LTV.

John: So we’re like, okay, well, then performance max is going to not only remarket the poor traffic coming from meta, but also the people that already bought are not going to buy 40 percent of my daily ads, but is delivering to those people, which means if I double that budget, I’m only going to grow by maybe 50%, which is a hit a point diminishing return starting at day one.

John: That’s what I like is when you’re looking at these platforms, you cannot measure in app, but you have to measure as. Is that the structure that’s actually going to grow if I couldn’t measure in app? And that’s where you’re like, actually, probably not. I need to be doing more outreach, or I need to be doing less remarketing, or I need to be spending less on my own branded terms.

John: I’m just going to keep talking until you stop me. So I think that’s kind of hopefully that answers the question. I can even show examples.

Ralph: Yeah, let’s show an example here. I mean, you do need to [00:21:00] rethink a great quote from a new customer of ours is and the reason why they. You know, or firing their agency is that they had their worst months and over a year and their agency reported back to them It’s like hey Everything’s great.

Ralph: We’re at 400 percent I forget the, it was like some sort of ridiculous number, 400 percent ROAS on Facebook and the client was like, we’re crushing it. And the response was you guys are crushing us. because our bank account is down and all you’re doing is you’re just either remarketing or you don’t know what you’re doing.

Ralph: But in so many cases, it’s the agency itself misreading the data or trying to take the platform level data and extrapolate that onto the overall health of the business, which is a real mistake.

John: Yeah. When your sole job is how do I make myself look good in front of my client versus how do I make my client win?

John: You’ll ultimately will get fired during the good days. Oh, yeah. I mean, [00:22:00] booming economy and low interest rates, everything. Sure, you can do whatever you want and be fine because you’re not on their radar. But as soon as things get a little tough, like the recession that we’re going through right now, and I know it’s, it’s not necessarily quote unquote a recession, but feels like it would have all the prices, everything.

John: But that’s where people look at the line items and they say, Hmm. Shelby spending this much here and there and here and there when their business starts to get into a little bit of hot water and you come in by saying, well, I still look good. Yeah, I mean, you’ll keep your pride, but you’ll be fired. That’s just how it goes.

Ralph: You’ll be fired eventually because they’ll say, well, I need to move on because my business isn’t moving on, even though you guys are doing what you’re supposed to be doing what I paid you to do because you’re a single channel. In some cases, we’ve talked about that on the show here. I mean, I think there’s various levels of fear right now based upon size of business.

Ralph: It certainly seems like the smaller businesses are experiencing that. And the reason why I think we’re seeing a little bit more on the attrition side for small businesses, like that smaller market. [00:23:00] Size is because even though the wealth effect is in effect right now, with the stock market being up and people sort of feeling wealthier, there’s something, there’s an undercurrent that’s there and we’ll leave links in the show notes back to our, you know, is there a phantom recession going on, which Kasim and I talked extensively about, so we won’t get into that here, but the point is, is, you know, if you’re looking at a single channel and you’re just taking it just as it is in platform, You’re not getting the full picture.

Ralph: That’s the difference between, I think, client centricity and just channel centricity, which is not the way to go. And I think even the, you know, even the large agencies that have multi channel, a lot of them don’t look at it this way. And then it really comes back to, okay, we need to sort of test some things that may or may not work out.

Ralph: To see what the net effect is, is, Hey, if we have your Facebook spend, what actually happens? And we have a client that just started with us. And then we know 70 percent of their conversions on Facebook are coming from these view through conversions, which [00:24:00] basically means these are people that we’re going to buy anyway.

Ralph: Like some of it. Yeah. But we’re finding that new term, which I know that you talk about, and I know we’re going to have Scott from wicked reports on here. Cause he’s got some pretty bad ass things to show us in this new interface. It’s like this NCAC number is a number that you’ve been using for. Quite some time now, and it’s still not 100 percent exact.

Ralph: I mean, obviously, North Beam, they model it. You figured that out sort of on your own. Some of these third party attribution platforms are starting to sort of come around to it, but it’s not ROAS. ROAS is a false god. You can manipulate that however you possibly Oh, yeah. It can be manipulated. You know?

John: Well The one thing that I always tell people that are like, well, we need to get ROAS higher and we need to, you know, we need the X amount of roas and X amount of roas.

John: I’m like, here it, it is funny. I said, ROAS isn’t important because if ROAS was important, why don’t I stop all of my ad spend except for your brand name, right? Well, we want new roas. Oh, well that’s not roas that, that’s not ROS nac. That’s Merv New media efficiency ratio, new customer acquisition costs. [00:25:00] New versus lifetime value of it there.

John: Now you’re thinking outside the box a little bit. The reason why Nike doesn’t hire agencies because they have 15 people in house that are all working towards one goal and multiple channels. And if we want to say we’re better than Nike, I challenge everyone to that. And not just Nike. I mean, use Nike as the representation of all of the large companies is yeah.

John: They have 15 people, but they’re all working towards one goal together. And every. Client at some time of ours has felt the Google versus Facebook versus Instagram versus TikTok versus organic versus email versus direct verse doesn’t matter. It’s not versus. That’s the part two. No, because have you ever heard of Google?

John: Uh huh. Have you heard of meta? Uh huh. No, it can’t be true. It’s one versus the other. Those people aren’t involved in the same channels. No, it’s people. That’s it. And you have a business. Everything is so specific to a company that you can’t measure in channel row as because your company will die, but the [00:26:00] agency will win.

John: And then you keep paying them and that’s exactly where it’s like, wait, and she’s like, we’re crushing it. And the other person’s like, you’re crushing me. That’s the mix because they’re not measuring correctly. They’re not measuring the same thing. If everyone measures the same way, like 70 percent of the issues go away.

John: It’s almost like two parents and then feeding a baby. That’s what’s interesting is the two parents are actually like the meta agency in the Google agency and the baby is the client. If you’re like, well, I fed the baby this formula, like, well, I fed the baby this better formula. Well, you actually overfed the baby because you overspent now the baby’s hurt.

John: That’s what’s really interesting is you have to measure what’s good for the baby. That’s where agencies don’t do that.

Ralph: That’s why you have two parents that are supposed to work together as opposed to like work opposite. We’re going down some interesting, as you’ve picked up, John, we’re big on analogies, you know, working in this company and talking on this podcast here.

Ralph: So can you show some examples of what we’re talking about? Yes, we’ve talked about this before. And if you’re listening and you’re like, Oh my God, I can’t [00:27:00] believe Burns is talking about this yet again. I’m going to keep talking about it because this is the future. And if you don’t get on the board, you’re going to be left behind and your clients are going to leave you behind if you’re an agency.

Ralph: So not that we want anybody to steal our secret sauce here, but it’s like we do the show to obviously educate the public. But by extension, we’re also educating our competition here, John, which kind of sucks, but you know, I’m a generous, I’m a generous guy, so I feel there’s enough, there’s enough for everyone.

John: Here’s what I’m going to say. Something pretty polarizing. The bad agencies aren’t going to be able to get this. Just what I share. Yep. You know, what’s funny is if I was teaching again, fun with analogies here, it’s the analogy show. If I was a board certified medical, yeah, you’re picking it up. I was a board certified medical doctor and I went to a seminar and I taught a new advanced way to do brain surgery and there’s some doctors in there that are like, you know, I just don’t get this.

John: Well, then you shouldn’t be a doctor. That’s my strong opinion. When I’m [00:28:00] talking about brain surgery is saving a human. Okay. When I’m talking about paid media and growing a business, you’re feeding children, that’s what you’re doing. This person has sacrificed their livelihood and to put everything on the line to build a business and you’re like, well, I just don’t care about that person or those kids enough to measure correctly, like that’s what you’re doing, you’re hurting families.

John: I take that very seriously. That’s the part too that I think people don’t get is like, well, the business went under, but it wasn’t my fault. That’s basically saying, I just, you know, made a family homeless and it’s their issue, not mine. That’s where you have to care enough to actually know this stuff inside and out, or get a new job.

John: That’s how I truly feel. So let me, let’s share

Ralph: YouTube channel. It’s perpetualtraffic. com forward slash YouTube. Probably one of the best screen sharers in the history of mankind. Check it out over at perpetualtraffic. com forward slash YouTube. I think that’s an apt analogy because there’s this surgery, like I actually had on my neck.

Ralph: It’s called the C disc replacement surgery. And I went to five [00:29:00] surgeons when I’ve hurt my neck, four of them had heard of it. And like, I’ll never do that. And the fifth one was like, yeah, it’s proven to be effective for 10 years in Europe and we’re going to do the surgery. Here I am five years later. It’s like, I have neck mobility.

Ralph: The point was, it’s like doctors. You would think the highest level are not even open to changing what they used to do. Oh, no, no, no, you have to do spinal fusion. That’s so antiquated. This new type of surgery is something that they reject because they’re afraid of it, because they probably have a certain subset of their population to say, I’m just going to do the same thing, and that’s what I’ve always done.

Ralph: And I look at agencies sort of the same way. It’s like when there’s a new way of looking at things that are coming along, I know all these attribution tools are not perfect, Northbeam’s not perfect. Wicked Reports isn’t perfect. Although, when we get Scott DeGracia on the podcast, he is going to say that it is.

Ralph: But the point is, is that, you know, don’t believe those guys. You have to believe like your bank account. That is the source of truth. Period. That’s [00:30:00] it. That’s it. That’s all that matters.

John: Exactly. That’s literally the only thing that matters. Period. And it’s scary to measure it that way. It’s hard. There’s a lot of variables.

John: You’re not going to understand it. You’re not going to know why. But that’s what really is the only thing that matters. Is and that’s why I’ve dedicated years of my life into doing is how do I actually move that number? Not mine, because I was that person where I’m like, man, 440 percent ROAS, we gained 62, 000 this last like three months.

John: And they’re like, Well, then why did I lose 10 percent of my business? Huh? And now I’m the idiot on that call. I literally at the end of that, I was just like, No, just fire me. Seriously, just fire me. I’m obviously not doing any good. That was a turning point where it’s like when I said, Hey, here’s the excellent.

John: Metrics that we get to show and I actually hurt that business then. Yeah, that was the where it’s like, okay They all measure the only thing that matters

Ralph: that feels like she’s

John: online.

Ralph: We did that. Yeah, we kept saying. Oh, yeah Multi channel like we’re doing great. We’re doing great. We’re doing great. And it’s yeah, you make money And then you lose in the end, [00:31:00] and I’d rather turn away.

Ralph: I know we haven’t really gotten philosophical on this. I’d rather turn away business than take it if they don’t get that. I mean, we could sell a customer for 50, 000 a month. And if I leave in two months, cause they’re not happy with our service, like that, it’s still. I take it personally, like it’s something to this day.

Ralph: I’ve been doing this 10 years. It pisses me off. And I’m like, what did we do wrong? And I know the last six months we figured out that it’s not about just one channel. It’s about. Understanding the client and feeling good about what we’re doing, even if we’re failing, even if we’re not doing, not getting the result, they say, all right, well, these guys are doing the right things because they have my interests in mind.

John: Well, and that might turn the point where is it? Was it necessarily the marketing issue? Was that a business issue? We know met in Google works. But what we’re doing is testing your actual business. And then you look at offer creation, blah, blah, blah.

Ralph: Yeah.

John: So, yeah. Again, I’m going to stop saying 10. Most agencies will have their [00:32:00] post getting fired water cooler meeting where it’s like, ha ha, that client was crazy, right?

John: Yeah. Yeah, they were. They’re so stupid. We’re, we’re awesome, right? High five. And then, and then go and report on another internal ROAS metric. Exactly. And that’s, that’s the difference between, well, that client’s just stupid. Versus maybe I didn’t do my job correctly.

Ralph: You know, we have, uh, one of our favorite leadership books of all time is Jocko Willings, extreme ownership.

Ralph: And it’s like, if a client leaves, it’s our fault, it’s not because they’re crazy. This has changed considerably. I’m not saying it’s perfect. And then we’re not batting a thousand here. Cause like you still strike out. But the point is, it’s like, you have to take ownership of it. I think there’s, there are still agencies that are growing, John.

Ralph: Like at last count, like we just bought another report that shows us 143, 000 agencies in the world. Yeah, that’s scary. That’s scary. And it’s growing at a five to 6 percent clip because what do you need? You need a laptop and some subject matter [00:33:00] expertise, and that’s pretty much it. There’s no barrier to entry and the undercut people in the market and you just go one channel or a single channel.

Ralph: So we just feel that’s not the right way to do it. No, I’ll pull up this example. Let’s do some tactical stuff.

John: Yeah, let’s do it. Here’s the best part. This is why I love what I do is because measuring what agencies measure versus measuring what businesses measure are heading in my example here, the opposite direction, but they’re heading in the opposite direction that’s better for the business.

John: And worse for the agency. So this company here, I mean, literally the last six days, it’s March 5th, March 10th, we’re recording on March 11th. Just so everyone knows here,

Ralph: we are looking inside the Google MCC right now. So if you’re not on the YouTube channel, head on over there to see, you can see what this is, because this is gold perpetual traffic.

Ralph: com forward slash YouTube. We’ll try to explain it as much as possible. If you’re driving or if you’re in the car here,

John: I’ll explain here. So this company was running performance max for a [00:34:00] while. This here is not necessarily a fault of the agency because what was being measured at the time looked. Now, when I helped this agency, , what we looked at is, what is the actual top line metrics year over year?

John: That’s the first thing that you want to look at. And they want to look at spend differences. They want to look at revenue differences and the new versus returning customer differences. Those are going to tell you 80 percent of what you need to know. And what we saw is that Meta was able to kind of reduce its ad spend and not really, by about 40 percent and not really hurt the business bottom line metrics.

John: So he said, Okay, that’s the first indication that meta was overspent. But also that meta was not really necessarily going after a good audience. So when you look inside of Google ads, and we see that performance max was running, I think 10 campaigns or 12 campaigns, whatever’s here, there’s like 12 performance max campaigns that said, Oh, that performance max campaign is going to remarket all of that kind of semi poor meta meta traffic.

John: Now meta wasn’t doing poor, it was just overspent. But then Google’s going to subsequently [00:35:00] overspend, what is that going to do, it’s going to drop your NCAC, drive it up. The new cost for acquired first time customer is going to be way more expensive than it needs to be. So after Meta pulled back, I said, we need to refresh Google.

John: We need to go after more new customers. We need to go after new cold traffic in Google rather than half Meta traffic and half Google traffic, which is what Performance Max does. Everybody out there that’s on the agency side or at this business side probably knows that, oh, I had a bad week in Meta.

John: Subsequently, you see a bad week in Google. That shouldn’t really happen. Not that much, not anything, not week over week. That’s not market based. That’s not market demand. That is those two channels being tied too closely together. So when we’re looking at how do we turn this company around from a slow death year over year, just by a small percentage points, it was doing good, but do you see it wasn’t scaling?

John: And that’s what I like to do is we like to scale businesses. So how do we scale? It’s not the current structure of the audiences. Omni channel marketers think about what ad spend do I have in these three main buckets. It’s [00:36:00] prospecting, remarketing, and acquisition. You want to have 70 to 75, sometimes 80 percent of your ad spend into prospecting.

John: Now, whether that’s inbound or outbound or a meta or in Google, it doesn’t matter. That’s phase two. Phase one is how much of my ad spend is going towards prospecting. And when you look at those channels, we had about only maybe 50%, maybe 55 percent of our total budget across all channels going towards prospecting, which isn’t scalable because now every dollar you put in, you only get 55 cents back.

John: That’s not ROAS metrics. That’s MER, media efficiency ratio. If I keep overspending on too much of the same audience, it’s not going to grow. We need to go after more prospecting, new cold traffic. That’s the wrong metric though, to grow. If you want to measure in app ROAS. But it’s the right way to measure if you want to grow the bottom line profit.

John: So here’s what we did is we went from spending 14, 000 on performance max from February 28th to March 4th, there was 14, 460 that was reduced because. On the 5th, there’s 334 here and spend it from the 5th to [00:37:00] the 10th, but that was just because it turned off in the same day, but for everyone at home, not being able to see the screen, February 28th to March 4th, 14, 000 was spent on Performance Max.

John: What we then switched to from March 5th through March 10th. was standard shopping campaigns. And that standard shopping campaign we then spent 24, 000 on. So we increased the ad spend by about 10 G’s. And the structural change that we did is Performance Max was going after a few smaller AOB items that were not the flagship items for the company.

John: And this is where I say you got to put your good marketer hat on where if I couldn’t measure the success of my campaigns, should I be spending money here? And if you look at it says, no, we shouldn’t really be spending the majority of our aspen on the product that didn’t grow our company. We should continue to spend money on the product that’s growing our company.

John: Very simple. So we put 24, 000 in the standard shopping and [00:38:00] four standard shopping campaigns. So we consolidated from like 10 P maxes down to four standard shopping campaigns and the standard shopping campaigns took a high, low strategy. And what high, low strategy means. You take your top products, your Pareto rule, the 20 percent of your products that make 80 percent of your sales, and you put a large amount of ad spend there.

John: This is 2, 100 per day. Then we take a, what they call the low strategy, which is a catchall. So let’s take the other products that. Are the 80 percent of our products that only make 20 percent of our revenue. And we stick a lower amount of ads been there. That is a thousand dollars per day. So what we’re doing is we’re forcing two thirds of our budget on prospecting into the products that we know is going to grow the company because shocker is how the company has been growing.

John: Great. We’re just doubling down on why we’re all here. So then we took a brand campaign that has 1, 200 a day because we want to make sure that this is extremely highly, highly, highly competitive [00:39:00] industry. I can’t name the industry, but it is a very high competitive industry. So we need to make sure that the money we spend on prospecting will come back and buy from us and not a very similar competitor of ours.

John: So you want to keep that fed enough, but not. overfed. And then we have just another product that we definitely want to scale up in the future. And so we put 800 on those singular products is only about 10 skews in there, but it’s a product that is working well, but just didn’t have enough ad spend to it and working well in the backend, meaning we are selling those products.

John: We need to put more money towards those products. So restructuring to a Pareto rule, high, low. With a brand and then put 10k more into it. Google says we spent 17, 000 more in this last five days and we lost 80 percent of our conversions. So we’re down 80 percent of our conversions and our conversion value is down 12%.

John: This one was also measuring a lot of ancillary performance max. Sales that actually [00:40:00] didn’t really matter and I can’t get too far into it. But it was like, think about like the free gifts and the freebies, you know, the easy, fast, cheap wins kind of stuff. So it looked like we lost 80 percent of our conversions in Google ads.

John: And it looks like we lost the ones that probably are the least profitable for the company and don’t matter and don’t, and aren’t measured, right? Exactly measured. Right. And Google says we lost 20, 000. Google says we’re down 20, 381 bucks. So we spent 17, 000 more and we lost 20 grand in five days. If I was an uneducated client, or if I was a less than intelligent agency, this is a failure.

John: I would probably be fired, and I would probably say, yeah, I messed up, fire me, and the client’s like, alright, you’re fired. Right now, both the client and the agency both think that this is wrong. This is bad. Why? Because we’re measuring in app ROAS. What actually did happen, is we went after new cold traffic on campaigns that are only designed to get the first click.

John: They’re not designed to get the second, third, fourth, [00:41:00] fifth click because they’re non brand standard shopping campaigns. So when you look at the standard shopping campaign, it’s only going to attribute the first click. Because think about how people buy. If I’m looking for, let’s say, a new pen, I’m going to Google best office pen.

John: And then I’m going to be introduced to a company called stainlesspens. com. And I’m like, wow, there’s such great pens here. I’m going to buy one. What is the next thing you’re going to do when you’re ready to buy? You’re not going to buy best office pen. You’re going to Google stainless pens. com, whatever it is, whatever that name is, you’re going to Google the brand.

John: Then let’s look at the backend from March 5th through March 10th, compared to the same days, week over week, which is the 27th or the third. I want to measure day over day because some have good weekends versus bad weekdays. So let’s just measure. Week over week, same day over day. We have 24 percent more sessions.

John: Good. Cause we scaled up, we have top line, only measuring top line. I don’t measure channel attributed. So we just measure top line. Cause that’s what the business growth measures, [00:42:00] 24 percent more new users. Are 7.7% more engaged. Good. What are the sales? We have 9% more conversions, 14,000 sales up to 15,288 sales.

John: And our revenue went from 215,000 to 283,000. It was a 32% increase in revenue. So if I just pull up my handy dandy calculator, ’cause I failed math in high school. And then now I do Google ads and meta ads, which is really funny. The most ironic thing you’ll ever hear. Mm. $67,000 in more. Revenue top line for 17, 000 more spend.

John: So divide that by 17, two, four, five, that is a 3. 93 incremental Mer and Mer, which means my new customer growth came in at almost just shy of a 400 percent Mer, not ROAS, but media efficiency ratio. So that’s that incremental growth at a profitable growth. And this is just six days, but in this scenario. [00:43:00] My ROAS is down 40%.

John: My conversions are gone 80%. Yeah. This looks like a complete failure. If the client. And the agency we’re measuring in app, but all we did was just put more ads, spend to a colder audience of good products that we know sell.

Ralph: I mean, if you’re not following and you’re listening to that, I would definitely recommend that you go over to the YouTube channel to see that.

Ralph: Cause it’s the exact opposite of what I would say. 99. 99 percent of all markers would do because the metric itself is showing this massive loss. But at the end of the day, it’s really, it’s about new customer acquisition.

Ralph: All right. Well, I hope you enjoyed today’s episode. There is a part two to this, which we will be airing later on this week. Make sure that you go over to perpetual traffic. com and download all the resources that we mentioned here on today’s show. And we really appreciate you leaving a rating and [00:44:00] review, especially over on Spotify means a lot to us and it gets this show out to more marketers.

Ralph: So we can start changing the perceptions that are out there in the market right now. Looking at a lot of these metrics that we discussed on today’s show, really important. Our number one mission on this show is to help you scale and grow your business. And it starts with looking at the right metrics that matter to produce that growth that really does scale. So the more people listen to this show. The better it is going to be for all of us out there in the marketplace, building and scaling and growing businesses.

Ralph: So on behalf of my amazing co host, Lauren Ipatrullo, who is not here today until next show, see ya.

Ralph: You’ve been listening to perpetual traffic.