ROI in India: Why Your CAC and ROAS Metrics Matter More Than Low Monthly Agency Fees
The majority of small businesses treat the procedure of contracting a digital agency in the same manner they do when buying a haircut, just select the lowest monthly payment. But are you going to do away with a good haircut to get one that will not stand in a week? On the same note, the choice of a marketing partner, based on low monthly fees, may backfire. The amount of money you spend in the competitive business world in India especially in Gujarat or other market economies of emergence is not the issue but how you utilize that rupee to bring in revenues. That is why such indicators as CAC (Customer Acquisition Cost) and ROAS (Return on Ad Spend), are gaining a significantly larger meaning than the commission of low fees to a digital marketing agency. You have no measurement of results, you are flying by the ear.
Understanding Key Metrics: CAC, ROAS, and Their Importance
What is CAC?
CAC (Customer Acquisition Cost) refers to the total customers pay to acquire a new customer. This is the cost of advertising, fees of agencies and sales staff, cost of creating, etc.
You can be losing money rather than gaining money when the CAC of your customer is too high in comparison with the amount of money they spend throughout their lifetime (LTV).
What is ROAS?
A narrower metric is the ROAS (Return on Ad Spend) which is used to gauge how much money a campaign generates per rupee of advertisement expenses.
That is to say that a ROAS of 4:1 means 4 revenue per 1 spent, which is a good ratio.
Why are these measures particularly significant? As they demonstrate efficiency, how effective is your marketing spending in creating actual business growth? On paper that agency may seem cheap, but when their campaigns are targeted poorly or converting poorly, then your CAC will be skyrocketing and your ROAS will be low.
The Indian Context: Digital Marketing Cost vs. Value
Digital Ad Spend Growing Rapidly
There has been a consistent increase in the total advertising market in India. In total, sums of money spent on advertising in India have been around USD 16-17 billion by FY24, with a higher percentage of the money consumed by the digital media. Redseer Strategy
Though numerous companies cut down their expenditure during recessions, most found that digital advertisements were effective in comparison to the conventional media as digital could be monitored, enhanced and answerable in real time.
Real Returns Being Reported
A survey of Indian SMBs covering social media marketing agencies is positive: some of them reported a growth of their revenues by over three times after the introduction of online advertising, with a considerable percentage of the companies reporting a higher ROAS of more than 2x.
These statistics lead to the idea that it is not the cheapness of the agency fee that is the real problem but how many rupees of revenue the agency is helping you to get for every rupee you invest in it.
Why Low Monthly Agency Fees Can Be Misleading
Some of the pitfalls that are associated with businesses that are based on low fees rather than performance include the following:
- High CAC: PPC services that are not effective may yield a low-quality lead or low-cost traffic that will need to invest more on ads to make conversions that are substantive.
- Weak Attribution and Monitoring: You may never be told whether the money is being channeled to unproductive channels without the appropriate tracking tools or reporting systems.
- Low ROAS / negative ROI: The adverts will receive more clicks but few sales which will translate to paying more to make a few sales.
- Wasted Time and Opportunity Cost: The marketing which fails to deliver results does not only cost money, but also it fails to seize the opportunity to attract the potential customers which could have been better attained by an excellent strategy.
The thing is, the money that is spent on the agency fees will not be saved in case poor campaigns happen.
How to Focus on ROI What Businesses Should Demand
Whenever you are hiring a digital marketing agency in Gujarat, a search engine optimization firm in Ahmedabad, or a social media marketing firm, remember to insist on:
- No secrets on keeping track of all costs and conversions (ad spend, agency fees, creative costs, etc.).
- Right CAC and ROAS (and even customer lifetime value) negotiation.
- Attribution models of trial and error and periodic reporting to understand which channels or campaigns are the best.
- The continuous optimization process and utilizing data to make decisions, rather than pre-determined strategies.
Besides, also compare the digital marketing cost in India on an agency fee basis, as well as on an effective spend to return basis.
Conclusion
When you are outsourcing the marketing partner, be it a social media marketing company, an SEO company in Ahmedabad, or a general digital marketing company in Gujarat, the low prices per month are not the major parameter on which the selection process is determined.
Rather than that, pay attention to such metrics that speak of actual business growth: CAC, ROAS, conversions, and customer lifetime value. These statistics will determine the sustainability and profitability of your marketing investment.
