As an online advertiser, you want to see your business expand while getting the most return for your buck. Whether you’re using social media, paid search, or native advertisements, establishing an ad campaign is only half the battle—the other half is determining the campaign’s impact on growth. Most businesses track and measure their success using a few key e-commerce measures, such as return on investment (ROI), cost per click (CPC), and return on ad expenditure / Spend (ROAS). Compared to all three, Return On Ad Spend (ROAS) plays a vital role.
Marketers use ROAS to determine the success of their marketing and advertising operations. It’s critical for new initiatives since it allows you to observe in real-time how much income a campaign generates vs. how much it costs.
What is ROAS, and How do you calculate it?
The term “Return On Ad Spend” (ROAS) refers to the amount of money spent on advertising. Every dollar the brand spends on advertising generates a certain amount of revenue. Unlike ROI, ROAS is solely concerned with the money generated by a particular ad or marketing campaign. Other marketing indicators (click-through rate or conversion rate) are helpful but do not entirely provide information on whether your money is being spent wisely. ROAS gives you a bird’s-eye view of how well a specific campaign performs financially.
How to calculate ROAS?
Calculating ROAS might not be as complex as it appears. Divide income by spending on a single ad or marketing campaign to calculate ROAS.
Use the following formula to determine the return on ad spends:
ROAS = Income from advertisements / Cost of advertisements
For example, if you invest $200 in an ad campaign and make $500 in revenue from it, your Return On Ad Spend (ROAS) is 2.5.
Why is it essential?
Advertisers Advertising on the internet should keep an eye on ROAS. However, it is vital to know that metrics aren’t the only thing it offers, but it provides you a fair idea of how well your ads are performing. Some of the reasons why ROAS is important-
- To identify Opportunities
Businesses can use Return On Ad Spend (ROAS) to assess the effectiveness of individual campaigns depending on their results. Examining each campaign separately allows a company to determine which ads are effective and scale them to achieve maximum results. You can run many campaigns, and as you evaluate each one, you can enhance your earnings by focusing on the ones with the best ROAS.
- Helps in Marketing Strategy
In the world of digital advertising, ROAS is the best option. It will enable you to evaluate the impact of a specific campaign on your company. This statistic offers you reliable data to help you make critical marketing decisions in the future.
How to Maximize Return on Ad Spend?
Keep in mind that ROAS is calculated by dividing the profit generated by your advertisements by the cost of such advertisements. Your ROAS will rise if revenue rises, but ad expenditure stays the same. Poor audience targeting, a low click-through rate, and a low conversion rate can contribute to a campaign’s poor performance. Use the below-mentioned tricks to maximize your ROAS or Return on Ad Spend-
- Check Accuracy
Getting an accurate result about leads will help with the overall revenue result and maximize your ROAS. Using metric tools is the best way to check accuracy in the number for the advertising purpose.
- Lower the Ad Costs
Some of the ways to lower your ad costs are-
- Experimenting with the Bidding Strategy – Developing a successful advertising plan is frequently a trial-and-error process. Avoid becoming enslaved to a single method of ad creation. Even if one of the biddings gets a hit, you’ll need to tweak it at some point to stay up with market shifts.
- Targeting the Right Audience – One way is to spend less money on advertising while reaching more potential customers by determining your target population. Divide your audience based on various factors, then craft ads and post-click landing page experience appealing to the right audience segments.
- Avoid Silly Mistakes
Online advertising faces stiff competition, and one silly mistake can cost you money and potential leads. Before going ahead with the ad:
- Proofread every aspect of the copy.
- Examine your website loading speed, content, and the ad copy created.
- Once you are confident with your product, go ahead with the online advertisement.
- Increase Revenue
Every company looks for new ways to drive in money from each customer, and there are some practical ways to do it. An eCommerce businessman will end up offering free shipping in return for a minimum purchase or volume order. The other effective way is to upsell by offering package deals (adding more to the cart) or using a recommendation engine throwing more higher-cost products or services in their search result before check-out.
Similarly one can find other ways to upsell and cross-sell to ensure better ROAS
Improving the ROAS is a continuous process. At every point of the advertising funnel, constant testing and optimization are required. You may significantly boost your ROAS by building precisely targeted ad campaigns and providing customized post-click experiences. With AI also playing a major role in ads optimization you can try out ReBid which uses advanced AI and ML to deliver better results.