Industry Benchmarks in MMM should not be a North Star

In a recent exploration call, a prospective client asked us “What does the average ROAS and MROAS look like for media channels in our industry?
Can we aspire to reach that average or exceed it?”

I have a bit of a contrarian opinion on this.

Industry benchmarks of ROAS and MROAS in an industry should not be a north star.

Why?

Because they average out the behavior of all brands in a category.
But here is the paradox, every brand at the same time is trying to outperform the category !!

So by definition, the “average” is not where a brand should be aiming for.

This problem becomes even more pronounced when we talk about ROAS or mROAS benchmarks.

Industry average ROAS/mROAS numbers often mix together:

▪️Large global advertisers spending hundreds of millions
▪️Mid size brands with optimized budgets of low millions
and
▪️Small players with erratic and bursty spends of thousands of dollars. Sometimes exceeding a million.

Before even looking at an “industry average” ROAS / mROAS, one must ask:

▪️What is the size of the company behind this number?
▪️What is their absolute media spend?
▪️Are they operating on the steep part of the saturation curve or in the plateaued part of the saturation curve?

High spending brands may show lower mROAS most of the time due to saturation, while smaller brands may show inflated mROAS simply because they are a bit under invested. Averaging these together produces a number that is mathematically sound but strategically useless.

Every MMM built for a client should look at the quantum of marketing spend, creative quality, media mix, distribution (both physical and digital) and price and promo dynamics.

An MMM built from a client’s own data points will be more powerful and more actionable than any external benchmark.

Industry Benchmarks can be a reference point.
They should never be the target to aspire to.