ROAS stands for ‘Return On Ad Spend’.
This is a very important part of any business, as it is very important to stay on top of measuring investments and results in relation to marketing and advertising.
Let’s look at what would count as a good ROAS and how to calculate it.
We will also provide you with some top tips on how to improve your ROAS.
What Is ROAS?
ROAS is a specific type of key performance indicator (KPI).
ROAS is considered by most online businesses when it comes to measuring an investment.
It reflects the amount of money that has been made from the advertising campaign.
To be more specific, it reflects the amount of money that is made from every dollar that is spent on advertising.
ROAS measures the profit that is obtained from the advertising campaign.
When you are calculating ROAS, you can either calculate the amount made from each marketing campaign or from the overall strategy.
How Is ROAS Calculated?
ROAS is calculated using a formula which is known as the ROAS calculation formula.
This Is The Following Formula:
ROAS=(revenue from advertising/cost of the advertising campaign) x 100.
This will give you the amount of money that you have made from the advertising campaign.
Let’s take an example, say you make $3000 revenue from an ad campaign that costs $200. In this case, the ROAS would be $1500.
ROAS results do vary, and it is tough to predict how much money an ad campaign will make.
You will have to be willing to make some losses, or sometimes to fall short of your expected revenue when it comes to ROAS.
How To Establish The Costs And Profit
You might have been thinking that the formula for calculating the ROAS was very straightforward.
While this is true, it is actually quite difficult to establish the costs of the advertising campaigns and the profits that are made from these campaigns.
It is a good idea to start with your Google Ads account.
Here, you can have a look at the results that the ads you are running are bringing to your site and business.
You might also be using Facebook Ads or LinkedIn Ads, which both do similar things to Google Ads.
The cost of your ROAS can vary greatly depending on what costs you’re going to include.
For instance, some people choose to include the costs of staff in these calculations, while others don’t.
What Is A Good ROAS?
So, let’s get to what makes a good ROAS. A good ROAS will vary from one company to another.
However, no ROAS can be good if it comes out with a negative result. It must always be a positive number in order to make for a successful ROAS.
In general, a good ROAS outcome is around 4:1.
This means that for every $4 that your company makes, $1 of this is spent on advertising.
There are a few things that impact these numbers, however.
- The size of the business
- The company
- The sector that the company falls within
Certain businesses will be aiming for a much higher ROAS, while others will be happy with a lower one.
There is a predictive analysis available that can predict how much revenue an ad is likely to make from the very early stages.
How Can You Improve Your ROAS?
Check Your Calculation
It is very important that you ensure that you’re correctly calculating your ROAS.
You need to be using the formula properly in order to do this.
You will also need to calculate all the right information on the costs and profits of the advertising campaign accurately in order for the ROAS to be accurate.
Once you have to check this information, you should use the statistics available to make some changes to the way you are advertising in order to get the maximum results from the smallest amount of changes.
Minimize Ad Costs
One way to lower your ROAS is to make sure that you are spending as little as possible on your advertising.
If you can lower the costs of advertising without lowering the success of the campaign, then your ROAS will improve.
Make sure that you add in some keywords that are likely to bring more traffic to your site. This will improve your score.
Not only should you make sure that your adverts are well designed, it is also very important that the landing page is also very successful.
You need to make sure that you are setting out your ability to solve the buyer’s needs and wishes.
You will need to make sure that you are tailoring your ads to your target customers to make sure that you are getting the most possible out of your adverts.
Landing pages are also very important. A quick loading speed and an easy interface is what you will need for your landing page to avoid losing any customers before they purchase any products.
When it comes to getting the best ROAS for your company, experience is essential.
For this reason, many companies outsource their advertising to a company that specializes in creating effective and successful advertisements.
Where a company goes wrong is by trying out lots of different approaches to advertising themselves, hoping that one of the ways that they try will work.
This will often result in underperforming ad campaigns.
You should always consult an expert if you feel that your ROAS is not as good as you want it to be.
This can help you to cut back on costs, making your business more successful.
What a good ROAS is depends on a number of different factors.
The size, sector and stage that a company is at will have an impact.
However, a ROAS must always be positive in order for it to be good. You don’t want to be losing money to an advertising campaign.
You should now know how to make the best possible ROAS for your company.