If you own or run a business you are doing digital marketing. How do you measure the success of your advertising dollars? Are you measuring conversion rates or click-thru rates? Cost per conversion? R.O.I.? All of these are essential measures of any marketing or advertising campaign, but they don’t help you isolate the success of a single campaign.
ROAS can be used to determine a campaign’s success. It allows you to see how much revenue a campaign generates against what you spend in real-time.
What is ROAS?
ROAS is the amount of money generated by every dollar you spend on advertising or marketing. Unlike ROI, ROAS focuses on the financial return from a specific ad or marketing campaign.
ROAS is expressed as a ratio. For example, a ROAS of 10:1 would represent $10 in revenue for every $1 spent. A good ratio varies from business to business, platform to platform, and campaign to campaign.
As a general rule, most companies target a 4:1 ratio overall. But a 2:1 ratio for Google Ads is considered average. A campaign to raise awareness, build a following, or grow an email list is going to have a lower ROAS than a campaign designed to raise sales. You have to measure ROAS in the context of what you are trying to accomplish.
How To Improve ROAS
If you’re running ad campaigns on e-commerce sites, experiment with different types of ads. Try banner ads vs landing pages. You may find that with a little tweaking one type of ad will perform better than another.
You can do it in-house or engage a PPC management agency.
You can vary your ad placement on social media sites. Run A/B testing on your ad placement to find the placement that gives the best result.
Refine your target audience. If you are targeting too broad an audience or even the wrong audience your ROAS will be poor. Social media sites allow you to narrow the focus on several different parameters.
Refine Keywords
If you are bidding on general keywords with large search volumes, you are spending more money and may get lost in the search results.
Look for issues unrelated to your ads. If conversion rates are high but revenue is low, your product might be priced too low.
There are many reasons for a low ROAS. Measure it in context and if it is too low, don’t throw up your hands, investigate the causes.
