IROAS: The Metric that Matters

What’s iROAS? It stands for Incremental Return on Ad Spend, and it measures your marketing effort’s impact on revenue. The key difference between iROAS and the oft-used ROAS is incrementality. ROAS doesn’t always give the full picture, but being able to measure incrementality means that we can better illustrate the value of your marketing efforts, when taking into account the visitation that is already occurring. iROAS allows you to isolate the impact of your marketing, separate from other potential factors and in doing so, makes it possible to verify that your organization’s marketing efforts led to incremental attributable trips - trips that would not have occurred otherwise. 

Determining iROAS requires proving the impact excluding the baseline. It measures a baseline visitation rate - a rate that people from certain markets are already showing up in your destination, with or without advertising efforts. First we determine: At what rate did this control group show up in-market? These are your baseline visits. Then, we measure the same question, but for people who were exposed to the campaign’s advertising. At what rate did the ad-targeted audience show up in-market? Comparing the two may reveal a statistic such as: “Ad-aware customers were 9.5x more likely to visit than the control group.” In doing so, it becomes possible to link your marketing efforts to increased visitation in your communities. 

The exact iROAS figure is determined by subtracting baseline visits from attributable visits, and multiplying that number by the average spend of the visitor when they’re in-market. This number represents the incremental campaign impact, removing any baseline visitation we expect was happening anyway. Then, that number is divided by cost of the campaign, and - voila - you have your iROAS! 

As the tourism industry maintains an increased focus on stewardship, we’re going to continue to see growing economic pressure on tourism boards - making it more important than ever for DMOs to really be able to prove their impact. Doing so is going to require a more sophisticated approach than what we’ve been doing in the past, which is why we expect that the iROAS metric is going to become one of the most important and sought-after KPIs moving forward.