A Full Information to Bettering ROAS (Return on Advert Spend)
What are the key metrics you track when starting a new campaign?
Have you thought about conversion or click rate? Costs per conversion? ROI?
All of these answers are important metrics for any marketing or advertising campaign. However, they do not help you determine the monetary success of an individual ad or campaign portfolio.
This is where ROAS comes in.
ROAS is the metric marketers need to determine the success of their marketing and advertising campaigns. This is crucial for new campaigns because you can see in real time how much revenue a campaign is making with the costs.
Marketers can use the cost per conversion. However, since this calculation focuses on only one conversion at a time, marketers only get part of the picture.
ROAS helps determine if a campaign is making the money it should be. If it doesn't, marketers can quickly pivot or reduce their losses.
What Is ROAS?
ROAS stands for Return on Ad Spend. This is the amount of revenue that will be made from every dollar spent on advertising or marketing. In contrast to ROI, ROAS only focuses on the ROI of a particular ad or marketing campaign.
ROAS is expressed as a ratio. For example, a ROAS of 10: 1 would translate into $ 10 in revenue for every $ 1 spent.
A ROAS calculation is similar to an ROI calculation, but it is very flexible and can be applied to one, several or even several campaigns. For example, you can use it to view a campaign with a new influencer or all of your email marketing campaigns for the quarter.
However, ROAS isn't as computationally specific as cost-per-conversion, click-through rates, or other laser-related metrics that marketers regularly look at. You get a holistic view of the success of a given campaign, but not as high as the ROI.
ROAS calculation
Calculating ROAS may not be as complicated as it seems. To calculate ROAS, divide revenue by the amount of money spent on a specific ad or marketing campaign.
For example, let's say your company spent $ 1,000 on a Facebook ad campaign that generated $ 15,000 in revenue. The equation would look like this:
With numbers it looks like this:
The ROAS in this example is $ 15 in sales per $ 1 spent. This is a simplified example – and a pretty good ROAS – but it gives an idea of how the ROAS is calculated.
Before you put numbers into this equation, there is one more calculation you need to do: the total cost of your campaign. This should include things like money paid to an agency to pay designers to bid on keywords, or to run a PPC campaign.
There are some other hidden costs that you need to consider as well.
- All manufacturing costs: Consider the cost of any vendor, including a freelance writer, graphic designer, or email marketer
- Salary: Take into account the cost of all internal staff working on the campaign
- Affiliate Commissions: According to AdEsspresso, this includes commissions and fees for network transactions
- Overhead: Include the cost of the devices and apps used for the campaign
Pro tip: There are free ROAS calculators available that use your ROAS to find out your budget, PPC spending, and some other helpful stats. This AdRoll article asks you a number of questions, including what type of business you run, the number and value of orders per month, and the number of website visitors you receive each month.
You will then be given a breakdown of the proposed advertising budget. I was wrong on the humble side and placed 100 orders worth $ 2,500 each for my tech site that gets 1,500 visitors a month.
These were my results. First, I got a monthly breakdown of the advertising budget:
The page has broken this down even further:
Now that you know what a ROAS is and how it is calculated, you need to figure out what a good ROAS looks like.
What is a good ROAS?
A good ROAS can vary from company to company and even from campaign to campaign.
In some campaigns, e.g. For example, in campaigns to raise awareness, build a following, or increase newsletter subscriptions, you should typically expect a low ROAS.
Most companies, however, aim for an overall ratio of 4: 1. That's $ 4 for every dollar spent.
However, the ROAS goals can also vary by platform. For example, a 2: 1 ROAS is average for Google Ads.
ROAS is not an independent statistic. This is an indicator of how effective or ineffective your ad or marketing campaign is. When your ROAS is low, browse your other stats to find out why.
How to improve your ROAS
A low ROAS doesn't necessarily mean your ad or marketing campaign has completely failed and you have to start from scratch. Your campaign (or website or product) might just need a little tweaking.
Here are some ideas to get you started on improving your ROAS.
Experiment with ad placement
If you're running advertising campaigns on media or ecommerce websites, experiment with banner ads versus landing pages, skins, or popups.
Strategic placement of ads on social websites can also increase your ROAS.
News: Sponsored posts and ads that appear directly in news feeds usually get more visibility and conversion at a better rate than other ads.
In-stream ads: Ads that appear in video can be placed in front of or in the middle of the reel. Pre-roll ads come before the main content and are about 25% cheaper than mid-roll ads. However, if they can be skipped, your audience may never see them. If the video is longer or not very engaging, you may never get to the mid-roll ad.
Mobile-only ads: Targeting ads on mobile only on Facebook and Instagram is also a great option for visibility. Facebook is the second most downloaded app, surpassed only by TikTok. Instagram has over 1 billion monthly active users worldwide.
Use audience targeting
By narrowing down your audience or using hyperlocal marketing techniques, you can get more conversions per dollar spent.
For example, Facebook allows you to target your ads based on many audience parameters such as location, age, relationship status and interest. You can also create ads for subsets of your target audience.
Since looking up AdRoll for this article, the ad is now showing up on my Facebook feed. Obviously, they've targeted their ads with interest in the hopes of finding leads who might be closer to a buying decision.
In the meantime, marketers can use local campaigns on Google to introduce their products to potential customers in their area.
Sometimes it's just a matter of choosing the right platform for your ads. For example, if your audience is younger, you might not be as concerned about Facebook as they are about Snapchat and TikTok. B2B brands may want to invest more money in LinkedIn.
Refine your keywords
It's tempting to search for trending or more general keywords that have a large search volume. If you bid on these, you are likely spending a lot of money getting lost in a sea of search results.
In a previous post, I described exactly how to choose keywords to bid on in order for your ads to be seen. First, find specific search terms that are relevant to your brand. For example, if you have a chain of pizzerias selling vegan and gluten-free slices, target keywords in these areas, e.g. B. on "cauliflower crust pizza" or "best vegan cheese pizza".
If you have physical locations, target location-specific keywords. After all, 96% of those surveyed by BrightLocal used the internet to search for local businesses.
Let's say your pizza chain has locations in Queens, NY. Don't stop targeting pizza places in Brooklyn. Bid on keywords that are specific to the neighborhoods of your pizzerias. Your keywords might then be "Pizza Shops in Forest Hills" and "Pizza Shops in Briarwood".
Use tools like Ubersuggest to research statistics and identify keywords to bid on.
Lower the cost of developing your ads
The first and most obvious step is to use your ROAS to eliminate campaigns that are not generating enough revenue. Better to put your time and effort (and money) into those who are.
Refining your keywords and audience can also save you money by channeling your money towards keywords that are more likely to rank you and the audience most likely to convert.
You may want to add negative keywords to your ads. A negative keyword is a term that you want to exclude. Your ad won't appear when people search for these terms.
When running PPC campaigns, you should limit your budget. Lots of click-throughs are only a good thing if you have the budget to support them.
Use Target ROAS in Google
When setting up advertising campaigns, you can select a target ROAS on Google. Once you've set a target ROAS, Google predicts a conversion rate based on your current concession values. This forecast is used to optimize your bids based on your budget.
You can set a target ROAS for a single campaign or an entire portfolio.
Investigate issues unrelated to your ads
A low ROAS does not always indicate a failed campaign. Instead, it could mean an issue outside of your ad strategy.
If the ROAS is low but conversion rates are high, your product might be too cheap. If click-through rates are high but conversions are low, you may have overvalued your product.
When users exit their carts, your UX can make the buying process confusing. Maybe the CTAs (calls to action) on your landing pages are not clear, or people are not sure where to buy your product or service. In that case, it's time to rethink your UX.
As you can see, there are so many reasons for a low ROAS. This type of ROAS is the means of sounding the alarm and telling you and your team to dig deeper into the problem.
Conclusion
ROAS is an essential metric for marketers and advertisers.
It helps to show the success of a single campaign or multiple campaigns by measuring sales against costs. When combined with other metrics, marketers can troubleshoot campaigns that are not successful.
Once marketers can figure out what works and what doesn't through ROAS, they can play with ad placement, tweaking and narrowing audiences and keywords, or just deciding if it's time to start over.
When you calculate your ROAS and determine that you need help identifying problems and implementing solutions, contact us. We are here to help!
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