Ever wonder how well or bad your online ads are doing? Well, like almost everything else, there's a metric for that, and it's called return on ad spend. Calculating the return on ad spend can allow digital marketers to optimize their actions and better achieve their marketing objectives.
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Templates using this KPI
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ROAS stands for return on ad spend, or return on advertising spend - a marketing metric that calculates the amount of revenue your company gets for each dollar it spends on advertising. It is very similar to return on investment (ROI or ROMI).
The practice of tracking ROAS is mostly used by eCommerce businesses or digital companies to evaluate the effectiveness of marketing campaigns. It helps measure the digital advertising efforts and their return.
The ROAS calculation is actually easy. You will need to take your total conversion value divided by your advertising costs. But now that you get the magic number, how do you know if it's good or bad? Now that's the challenge.
Although it varies according to industry, type of business, etc, in general, an average ROAS or 3X or more is considered "good". This means that every dollar spent on advertising generates three in revenue. It's also influenced by the overall health of the business, profit margins, and other operating expenses.
A low ROAS is generally a ratio below 2:1. Other metrics to consider when looking at the bad impact of marketing investment are the churn rate, organic sales, and click-through rate. These can easily be found in your Google Analytics account or any CRM you may use.
From digital marketing, PPC and email marketing, these reports give you a good view of all your online marketing strategy metrics and overall online performance.
From SEO to social media and PPC, this report gives you a good view of all your online marketing strategy metrics and overall online performance.
PPC report template
Check your campaign cost, conversion rate, ad spend, gross profit and more, from all your marketing channels. You can also track this data alongside your business metrics and industry benchmark.
Email marketing report template
A report with all the most important metrics for your email marketing analytics, like click-through rate, open rate for individual campaigns, number of subscribers, and much more.
Here are some of the best practices you should keep in mind to achieve your target ROAS.
Get to know your target audience
No matter if you advertise on google ads or Facebook ads, in order to optimize your ROAS, you should definitely know who you're talking about. This will help you divide your ads into ad groups, this will improve your bidding strategy since you will know which keywords to track and this will maximize the results of your ad campaign.
Use A/B testing
If you aren't A/B testing in your marketing strategy, think again. Although looking into a crystal ball to determine what will convert customers would be nice, it’s not possible. Instead, we recommend A/B testing, which is basically creating 2 different ads or landing pages to see which of them converts best. You will get different ROAS data and determine which ads work best for your target market.
Track it alongside other metrics
Like most metrics, tracking it by itself could be a mistake. In order to get a more accurate big picture of your marketing results, you should track your ROAS alongside other metrics like cost per lead, cost per acquisition, conversion rate, and customer lifetime value (CLV).
Although return on ad spend (ROAS) is widely used, there are multiple synonyms that can be used. Here are a few:
Ad spent ROI, Advertising ROI, Return on ad spend, Return on ad spent, Revenue per cost, ROAS $, ROAS %, Return on marketing spend
Conversion Rate
Customer lifetime value (CLV)
Customer acquisition cost (CAC)
Return on marketing investment
Traffic sources
Cost per acquisition (CPA)
Cost per lead (CPL)
Unique visitor
Bounce rate
Average time on page
Keyword Difficulty
Pageviews
Domain rating
Domain authority
Backlinks
Referring domains
