The Perceived Causality in Benefit/Cost and Cost/Benefit Ratios – MSI

Working Paper

The Perceived Causality in Benefit/Cost and Cost/Benefit Ratios

Archer Pan, Jean-Louis Sterckx, Bart De Langhe and Stijn van Osselaer

Apr 10, 2025

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Analyzes six online experiments to determine how using Return on Advertising Spend (ROAS) versus Advertising Cost of Sales (ACOS) metrics affects assessments of advertising effectiveness, investment and strategy.

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research recap

Demonstrating Marketing Effectiveness: Not All Metrics Are Created Equal

Metrics used to demonstrate marketing effectiveness can be mathematically equivalent but have opposite effects. Revenue/cost ratios such as Return on Advertising Spend are more likely than cost/revenue ratios such as Advertising Cost of Sales to persuade decision-makers that advertising causes sales but may also reduce their willingness to risk innovations.

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