We'll discuss how to use NC-ROAS and new customer revenue to determine paid acquisition performance.
Disclaimer - if you have over 20% of your traffic coming from channels that are not email & SMS or paid ads this metric may not be as useful to gauge new customer ROAS.
When it comes to gauging the effectiveness of your paid ads as a whole, NC-ROAS is a foundational way to determine overall success. NC-ROAS stands for “New Customer Return on Ad Spend.”
Simply put, NC-ROAS is a great way to determine the effectiveness of your paid ads strategy in acquiring new customers. To calculate NC-ROAS, divide your new customer revenue by your ad spend over the respective period of time that you’re analyzing.
Here at Aplo, our focus with clients is centred around scaling sustainably. To do so, it’s important to understand NC-ROAS metrics along with new customer revenue to have a pulse on the percentage of overall revenue being driven by new customers across your store as a whole. Knowing these metrics will allow you to make better spending decisions in your scaling process.
Have you noticed that over a certain period of time, your store is not as profitable as you would like it to be? Analyzing NC-ROAS along with the percentage of new customer revenue across your store during this time will allow you to pinpoint the likely cause of this profit issue, and make solving it much easier. Too often businesses will look at a dip in profitability and immediately focus on paid ads as the culprit of this. Well, if you determine that NC-ROAS over this period of time remained relatively the same, but new customer revenue as a percentage of your overall revenue was up, then there’s your answer. Sales coming from new customers through paid ads will always be at a lower margin than return customers being driven through email & SMS marketing. So if your NC-ROAS is the same, but new customer revenue as a percentage is up significantly it’s time to look into your email & SMS strategy over this period to determine why return customer revenue is down. There are many variables in situations like this that are business to a business dependant, but I hope this provides an example of one of the use cases surrounding NC-ROAS.
Having a healthy NC-ROAS is a foundational piece to scaling sustainably. This metric will fluctuate depending on how aggressive you’re being with spend, but will always provide a good pulse on your overall effectiveness of acquiring new customers through your paid channels.
If you’re looking for an easy tool to use that calculates this for you, check out Triple Whale!
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