Marketers live and breathe in a competitive world that is dominated by data. In paid search advertising, for example, work is constantly being done to improve important metrics such as quality score, click-through rate or cost per conversion, metrics that, in one form or another, fall under the umbrella of a major indicator of advertising success: ROAS. What is ROAS?
If you’ve never heard of it, or maybe you only have a vague idea of what it is, don’t worry. In the article below you will find out:
- What is RoAS and how is it calculated?
- How to achieve a ROAS increase
- What it means and how to do roas optimization facebook ads
- What it means and how to do roas optimization google ads
What is ROAS and how is it calculated?
ROAS (short for return on ad spend) is an indicator that gives a better perspective not only on the factors that lead to conversions, but also on the revenue that your conversion actions generate.
In other words, ROAS measures the effectiveness of a digital advertising campaign. So, in the online environment, ROAS helps businesses assess which advertising methods work for them and how they can improve their marketing campaigns in the future.
ROAS (return on advertising spend) therefore measures the amount of revenue a business earns from every cent, euro or dollar it invests in online advertising campaigns.
Thus, ROAS measures the effectiveness of the digital marketing campaigns set up. The better the advertising messages you deliver connect with your potential customers, the more revenue you will get from every penny you spend on advertising.
The higher this return on advertising spend (ROAS), the better.
Since this return on advertising spend is such an important value in marketing, you may think it is an extremely difficult value to calculate. If you find yourself in this situation, you have never been more wrong.
The ROAS formula is extremely simple. ROAS is the ratio of total conversions to advertising costs.
In short, to find the ROAS of your advertising spend, divide the total revenue generated from the digital marketing campaign you created by the total budget you invested in that campaign.
Intuitively, you can see why I stated above that the higher the ROAS, the better it is for you and your business.
A concrete example of how to calculate ROAS is as follows.
If in one month you invest a total budget of 500 euros for a digital marketing campaign, after which your company had sales of 10000 euros, the ROAS will have a value of 20 (10000/500).
So, for every 1 euro you invested, you earned 20 euros in sales.
How to achieve an ROAS increase?
Once you know what ROAS is and how it is calculated, the next logical question to ask yourself is how you can increase your ROAS, how to optimise your return on advertising spend.
First of all, you need to consider that you need to streamline the terms in the ROAS calculation equation.
In terms of total revenue generated from your digital marketing campaign, this is the result of clicks received, post-click conversions and, last but not least, revenue per conversion.
Therefore, in order to improve the ROI of your advertising spend, you need to consider reducing the cost per click, improving the post-click conversion rate and increasing the revenue per conversion.
What does it mean and how to do ROAS Facebook Ads optimization?
A good ROAS on Facebook Ads depends on several factors, including the marketing objective of the campaign, the industry to which your company belongs.
If you want to handle your marketing campaigns yourself, we have prepared below a list of several suggestions for you to put into practice, depending on which ones suit you:
- Create a Marketing Funnel
To increase your ROAS, you can create remarketing campaigns that target people who have visited your website before, people who have added products to their online shopping cart but haven’t completed the purchase process, people who have watched all of your Facebook videos.
- Make sure the ad you display solves the problem of your target audience
An essential thing when you want to increase your ROAS is to create ads that your target audience will resonate with, ads that will convince them to take action (i.e. buy your products or services). That way, your cost per conversion will go down and you’ll get a higher ROAS.
- Understand which ad format suits your target audience
Understanding what type of advertising works best with your target audience is essential in optimising conversions.
So, if you have more information to communicate, you can opt for a carousel ad. If, on the other hand, you are announcing new product launches, you can use collection ads.
Optimising return on spend on Facebook requires continuous testing and experimentation. Constantly tweak the creative concept, see which ads perform better and use those patterns in creating new content.
In addition, it is important to continuously test audiences, types of promotions, texts. The more you test, the more you will see what needs to be improved and the better the results will be.
- Create a lookalike audience
When you have collected enough data about your customers, it is natural to use a lookalike audience for your Facebook advertising campaigns.
Since you know that your products appeal to certain types of people, it’s natural to target similar types to increase your sales and therefore your ROAS.
You can create similar audiences based on similar traits, habits, interests that Facebbok recognizes in other users on the platform.
What does it mean and how to do ROAS Google Ads optimization?
Even if you are new to Google Ads, you know that in order to be successful and to increase your company’s profits through ads on this platform it is advisable that they have a ROAS as high as possible, just like Facebook Ads.
Whether you want to optimize your ROAS on Google Ads with the help of a digital marketing agency or you want to take care of this aspect of your business yourself, below you will find a list of several suggestions to try.
- Create Dynamic Ads
Another way to increase your ROAS is to run dynamic ads, so that potential customers can see unique ads based on their browsing activity on your website.
- Check ROAS accuracy
Another important step in optimizing ROAS in Google Ads is to check if the return on ad spend is implemented correctly.
- Reduce your advertising costs
If you reduce your advertising costs, you will greatly improve your ROAS. Make sure you don’t lose money on keywords you don’t want to target. Improve your quality score. So, if you rank better in Google search engines, you will get more traffic to your site, and thus reduce your bidding costs.
- Generate better advertising performance
Optimise keywords. These keywords must not only be relevant to the products and services you offer, but they must also be segmented according to the ad group and landing page. Test your landing pages.
- Automatic bidding
If you are new to Google Ads, it is best to consider Google’s automatic bidding feature. It will automatically set a bid amount so that you get the highest conversion value at the ROAS percentage you set.
ROAS is one of the most important metrics for marketers around the world. Getting a good ROAS can take months.
Improving ROAS is not a one-time activity. It requires continuous testing and optimisation.
Whether we’re talking about Facebook Ads or Google Ads, you can always choose to turn to a digital marketing agency to help you constantly improve your ROAS.