“What is good ROAS?”
“How can I improve my ROAS?”
These are the two most common questions when it comes to ROAS. In both cases, there’s no one-size-fits-all solution. However, there are three factors that determine success:
- Attributing performance correctly
- Keeping ad costs as low as possible
- Getting your conversion rate as high as possible
Before we get into how to improve ROAS, let’s start with how ROAS is calculated.
What is ROAS and why does it matter?
ROAS is a metric used to measure the total revenue generated per advertising dollar spent. It is calculated by dividing the campaign revenue by the campaign cost.
For example, if a DTC shoe company spends $10,000 on a Facebook ad campaign that results in $50,000 in revenue, the ROAS is calculated as: $50,000 ÷ $10,000 = $5, or a ratio of 5:1.
For every $1 dollar the company spends on the campaign, it generates $5 worth of revenue.
How can I improve my ROAS?
ROAS is a helpful metric for evaluating ad campaign performance so that you can optimize and improve them. If your return on ad spend isn’t where it needs to be, there are a few things you can look at to improve it.
1. Review your accuracy
First, take a look at your data sources. One of the limitations of ROAS is that it can be tricky to accurately attribute multi-channel, integrated campaigns. Are you including offline sales and indirect forms of revenue? What attribution model are you using? If your attribution model is off, an otherwise successful campaign can appear to be underperforming.
2. Reduce your ad costs
Digital marketing is about efficiency as much as it’s about performance—your objective is to generate the maximum results from the minimum ad spend. If your ROAS is weak, it may be that your ad costs are too high. There are a few ways you can make your ad spend more efficient:
- Refine your keyword strategy. Did you know the average Google Ads account wastes up to 76% of its budget on the wrong keywords? Take a fresh look at your keywords and see if you can find opportunities to target less competitive terms. You can also add negative keywords to further refine your target and only incur ad costs for the right audiences.
- Improve your Google Quality Score. For Google Ads campaigns, improving your Quality Score can boost your ranking, which in turn lowers your costs.
- Narrow your target audience. Focusing on a very specific target audience can help you concentrate your ad spend on the prospects most likely to convert.
3. Improve your campaign performance
In addition to reducing your costs, the other part of the equation is increasing your revenue. One key way to do this is to make sure your landing pages are relevant to your target audience. Creating a 1:1 personalization strategy that aligns your landing pages to very specific target audience segments can significantly increase your conversion rate and ROAS.
Need help getting started?
We can help you start optimizing your ad campaigns and landing page conversions. At Postclick, we offer a complimentary consultation and analysis to better understand your post-click health and to take you on the path of improvement. Request your free conversion analysis here.