What Is A Good ROAS And How Can It Be Useful:
For a long time, ROAS has been a metric that marketers have used to measure the success of their advertisements.
This article will help you figure out what it is and how to calculate it, as well as understanding how this can be useful for your branding strategy.
ROAS stands for Return On Ad Spend (ROAS). This metric includes what you spend on advertising and how much sales you receive as a result.
A higher ROAS means that your advertising is more effective because it is driving a greater return on your investment.
This is an important metric because it lets you know whether you should increase your ad spend or not.
If your ROAS is low, then you should increase ad spend to get a better return. If your ROAS is high, then you do not need to increase ad spend.
There is a different formula for calculating ROAS depending on if you are an affiliate or advertiser.
An advertiser needs to calculate ROAS by dividing the cost of advertising by the revenue generated from that ad spend.
An affiliate needs to calculate ROAS by dividing the revenue generated from the sale of a product you were paid to place by the cost of advertising. That is why it has a different formula.
Significance of ROAS:
- Getting site visitors to take action on your ads is an absolute requirement for ROAS.
Anyone who promotes what their company has will always be required to implement advertising in order to get traffic and build up brand awareness or goodwill moving forward.
However if you're only getting 10% of this new attention (for whatever reason) then all bets are off for the foreseeable future as it wouldn't be beneficial towards your business goals .
- Low Return On Advertising:
When ROAS is low, it could mean a number of things (a long learning curve for website designers and developers or a misdirected approach from marketing team) however the likely culprits are very often clicks that give no benefit to your business in any way.
This issue can be cleared up by benchmarking other online shops making use of varied purchase methods like paid ads etc but even then you should still calculate its ROAS based on ROI and not simply advertising spend.
- Insufficient Advertising Budget:
ROAS is the lift you get from an ad and very little say in terms of how much money a campaign should cost .
There's no easy mechanism to calculate spend when your effort isn't targeting sites that have sufficient traffic to create an ROI, so sometimes it could be cheaper for business owners simply not spending ads on their site at all as logical places like Facebook/Google are saturated with them .
- Low Traffic:
Unfortunately when it comes to an online store the most critical aspect of ROAS is traffic because without this you won't be able to get traction into market awareness or customer buy-in .
This is because a poor website image drives the customer to pay for reviews to help improve their decision of where they buy .
- Keywords with low search engine results:
You can't measure ROAS without some foundation from part A, but when it gets to slicing corners, you often go to niche pages with little competition and are far easier to promote than organic search engines with high competition rates .
For example, Don't overlook them when you are in search of your ideal keyword or phrases to target, as they can easily drive ROAS that is nearly 10 times as valuable.
What is a good roas:
For an ad campaign to be successful, it needs to have a good return on investment, or ROAS. The higher the ROAS is for your ad, the more likely you are to see success.
This is because ROAS is calculated by taking a number of different factors into consideration and using them to determine whether or not the ad was effective.
There are many different factors that can affect ROAS, and depending on the particular campaign and advertiser, several of these factors may be more important or less important.
It is important to weigh both the sales volume and the price of advertisements heavily when determining ROAS.
For instance, if you are paying a high price per click on search ads but you are getting very little in return, you may want to rethink that strategy.
On the other hand, if you are only paying a low price for each click and your sales volume is growing, then you may want to focus on increasing the price per click.
If you are not getting the results you want, then it is time to take a good look at your strategy for ROAS.
There are a number of different factors that can affect ROAS and they all should be taken into consideration when evaluating your performance.
Because every brand glances at the metric differently, there is no such thing as a good ROAS.
A value of 4:1 is a notable difference for some brands. Others would allow this to be a massive failure.
Factors Affecting ROAS :
1) The prices per click on your ads, and how much advertisers are willing to pay for each click:
High priced clicks usually mean high returns but lower volume is achieved which leaves you in a precarious space where earnings may increase but results don't.
Low PPC costs sit at quite opposite ends of this spectrum, often resulting in poor performance because there is very little return for marketing dollars invested.
2) The type of advertisement you are running.
Advertisements with consistently high click through rates (CTRs) typically yield larger ROAS than advertisements without such high CTRs, which doesn't necessarily entail that the ads were good advertising.
Other factors such as brand awareness and awareness of the products or services in your industry are also added to this factor.
3) The amount of money spent on your click campaign:
There is no definite correlation between quality and returns, however it must be factored into any evaluation method because most marketers believe that in order to make money from ads they would naturally have to pay based upon the ROAS they can achieve which boils down to one equation.
4) The skills of your web designers, developers and ad agency partners
These are directly reflected by how well the ads sell. Every piece of content copied has to be refined many times until it finally reaches market clarity.
5) Other research you have done may influence ROAS:
Not every business is classified under a specific category such as "online sales" or "mobile phone hardware", however this fact alone can affect loss ratios .
The degree of interaction a business is taking with Site visitors could also fall in this range and should be factored into the evaluation.
ROAS is the holy grail of internet marketing efforts . Ensure that you have one to hit before accepting a search budget from your client.
Conversely, when it nears its end you're better off deciding to accept no search budget and simply work alternative search channels such as social media platforms that can provide a similar ROI at reduced cost.