For Australian SMEs, understanding the true profitability of marketing spend is critical. We’re seeing a lot of businesses still heavily focused on Return on Ad Spend (ROAS), but in a maturing digital landscape, relying solely on ROAS can be seriously misleading. It’s time to shift the focus back to Return on Investment (ROI) to unlock genuine growth.
ROAS measures revenue generated for every dollar spent on advertising. It’s a useful metric, certainly, but it only looks at a small piece of the puzzle. It doesn’t account for the *total* cost of acquiring a customer. Think about it: advertising is rarely the only expense. There’s creative development, marketing technology subscriptions, staff time, and potentially sales team costs involved in converting that ad click into a paying customer.
Here’s why ROI tells a more accurate story:
- ROI considers all costs: ROI calculates profit generated for every dollar invested across *all* marketing activities – not just ad spend. This provides a holistic view of profitability.
- It highlights efficiency: A high ROAS doesn’t automatically mean efficient marketing. You could be spending a fortune on ads to achieve that revenue, while a lower ROAS with a lower overall cost base could deliver a higher ROI.
- Long-term value is captured: ROI allows you to factor in customer lifetime value (CLTV). A customer acquired through a campaign might make repeat purchases over years, significantly increasing their overall value – something ROAS ignores.
- Strategic investment decisions: Focusing on ROI encourages us to analyse which channels and campaigns deliver the greatest overall profit, allowing for smarter allocation of marketing budgets.
As marketing channels become more competitive and data privacy regulations tighten, accurately measuring profitability will only become more important. In 2026 and beyond, businesses that continue to rely on vanity metrics like ROAS will struggle to justify marketing spend and demonstrate genuine growth. We anticipate increased pressure on marketing teams to prove bottom-line impact.
The key takeaway? Don’t just chase revenue; chase profit. Start calculating your marketing ROI today. It’s a simple shift in perspective that can unlock significant value and drive sustainable growth for your business. If you’re unsure where to start, consider a marketing audit to identify all your costs and accurately measure your current ROI.
