TACOS: balancing simplicity and precision to benchmark Retail Media performance

Frederic CLEMENT
December 11, 2023
min read
TACOS (Total Advertising Cost of Sales)

In today's rapidly evolving retail media landscape, businesses are continuously seeking more effective ways to compare performances across various networks. Enter TACOS (Total Advertising Cost of Sales), a metric that's gaining traction over traditional ROAS (Return on Advertising Spend), especially when it comes to making such comparisons with reasonable effort.

Understanding TACOS and its strategic advantages

The Total Advertising Cost of Sales (TACOS) metric offers a fresh perspective in evaluating advertising efficiency, particularly in the context of retail media networks. Unlike ROAS, which simply divides the revenue generated from advertising by the cost of those advertisements, TACOS measures the advertising spend against the total revenue (paid and organic), providing a more complete view of a business's financial health.

Why choose TACOS over ROAS?

We recommend using TACOS for two main reasons:

Comprehensive sales insights: TACOS accounts for the total revenue, encompassing both direct and indirect sales impacts of advertising. This broader scope helps businesses understand how advertising contributes not just to immediate sales but also to overall market presence and brand recognition.

Long-term strategic focus: While ROAS is excellent for evaluating the immediate return of specific ad campaigns (especially lower-funnel ones), TACOS encourages looking at the bigger picture. It aligns advertising spend with long-term business goals, considering how ad expenditure today can contribute to sustained growth tomorrow.

Flexibility in campaign management

TACOS stands out for its adaptability, catering to varied campaign lengths, sales periods, and product ranges. This flexibility is a game-changer in retail media networks, where one-size-fits-all approaches rarely work.

Tailoring to specific timelines: TACOS allows companies to analyse the impact of advertising over different periods of time, depending on the brand's needs.

Versatility across product spectrums: with its ability to be applied to diverse product categories, TACOS is invaluable for retailers managing a broad inventory, offering insights that guide strategic decisions across different market segments.

TACOS stabilisation over time

Practical steps for incorporating TACOS with mimbi

To effectively utilize TACOS in your marketing strategy, a structured approach is necessary. Here are some practical steps to integrate TACOS into your advertising analysis and decision-making process, using a platform like mimbi:

Data integration: Start by ensuring that your advertising data and overall sales data are synchronized. This integration is crucial for accurate TACOS calculation and analysis.

Data wrangling for accuracy: beyond just synchronization, investing time in data transformation is crucial. Data from disparate sources often requires cleaning, validation, and normalization to enable accurate analysis. Transforming advertising and sales data into consistent, unified formats is an essential step before TACOS calculation.

Ad hoc TACOS calculation: set your own sales and ad spend figures and easily compare performance across retailers

Segmented analysis: calculate TACOS to different product segments or campaign types. This detailed analysis can reveal which areas benefit most from advertising and which might need a different approach.

Regular monitoring: Establish a routine for monitoring TACOS. Whether it's weekly, monthly, or quarterly, consistent tracking helps in understanding trends and making timely adjustments. Choosing the right visualization platform will help.

mimbi platform

Optimizing strategies based on TACOS Insights

With valuable insights from TACOS, optimizing your advertising strategies becomes a more targeted and effective process.

Here’s how you can leverage these insights:

Adjusting campaigns: Use TACOS data to identify high-performing segments and campaigns. Adjust bids and creative to maximize efficiency.

Improve product page content: If TACOS trends show poor conversions, improve product page content like images, descriptions and UI.

Reallocate budgets across networks: analyze TACOS performance by network to optimize budget allocation towards most effective channels.

By implementing these strategies, you can make your retail advertising efforts more efficient and aligned with the overall performance of your business.

Budget allocation

As a conclusion, TACOS is more than just a metric; it’s a lens through which to view your advertising’s impact on your commerce’s strategy overall success. By effectively implementing and optimizing TACOS in your retail media initiatives, you can ensure that your advertising efforts contribute meaningfully to long-term business growth.

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