To be great at advertising, you need to be both innovative and an out of the box thinker to stand out in the competitive business world. Markets need to also analyze their data and numbers in order to measure the effectiveness of their advertising campaigns. Any marketing campaign at its core is about driving revenue for your business. This leads to the important topic of Return on Ad Spend.
Return on Ad Spend, or ROAS is a marketing metric which measures the revenue generated against every dollar spent in an advertising campaign. These are important, as they allow your business to see a big picture of if your advertising campaign is generating enough revenue to make up for what you’ve spent on the overall campaign. You’ll also need to track the key performance indicators, or KPIs to gauge the effectiveness of the campaign and so you can make improvements when things aren’t working. These concepts are similar to stock investing and Return on Investment, or ROI. ROIs measure the return of a larger investment. This metric is typically used to measure the return on ads as well as hiring influencers, or web designers for your campaign. Any marketing expenses should be included with an ROI.
Without tracking your ROAS, as well as other business expenses; you might end up making poor choices based on the limited information and analytics you’re receiving from other metrics. Ideally, aside from increasing brand awareness; you should be treating increased revenue as the outcome of your advertising campaigns. Without tracking an ROAS, this is incredibly difficult to follow. It also means you can’t further optimize your ad campaign for success. Tracking your ROAS over time lets you see the performance of your advertising campaign; and will inform your decisions on if you should renew the campaign or cancel it to avoid wasting money on further ads. Moreover, the higher level executives of your company will want to know how much revenue your efforts are generating; ROAS allow you to answer these questions accurately. ROAS help you figure which campaigns are driving your results and which aren’t. You can continuously refine your ads to generate more revenue, as long as you pay attention and track your ROAS.
Thankfully, calculating your ROAS is a pretty straightforward process. ROAS is a ratio of the revenue generated from an ad to the cost incurred on the campaign itself. For example, if you spend $1000 on ads in a month and earn $4000 per month from people who click on the ads; your ROAS would be $4000 divided by $1000, or a ratio of 4:1.Calculating ROAS is simple, but it can be challenging gathering data from it. One way to get accurate insight into the effectiveness of your campaign using an ROAS; you need to know the exact among of revenue you’re generating. Attributing sales to specific ads often requires some data crunching. Thankfully, there are a variety of social media and analytical tools such as Facebook’s attribution tool and Googles My Business program. Regardless of how you get this data, you need to make sure its as accurate as possible.
There’s no right answer here. A good ROAS will vary from business to business, and even campaign to campaign. Every industry and platform has different goals in mind for their advertising campaigns. In general, a rule of thumb with ROAS is a ratio of 4:1 ($4 in revenue for every dollar spent), or higher typically indicates a successful campaign. This isn’t something to swear by, as some businesses may need larger ratios to stay profitable. Keep your profit margins in mind when setting up a ROAS goal.
There are a variety of ways you can boost your ROAS and maximize your returns. One of the most important factors is to review the accuracy of your ROAS. Making sure your information is both up to date and accurate is pivotal to both your ad campaigns success, and your business as a whole. Be sure you’re tracking all relevant costs to your ROAS, but not operations. Including things like order fulfillment in your ROAS calculations; it will make your ROAS appear lower than it actually is. Another thing you can do is lower the cost of your campaign. You can try reducing labour costs but working in house, avoid targeting the wrong key words on Google, and narrow your target audience. Your keywords are often pivotal to your success as well, as these search terms are the things which make search engines thrive. You’ll need to refine them and keep them updated with relevant search trends of the time. Low ROAS may not even be the result of your ad campaign failing. Perhaps your site isn’t well designed and frustrates customers, or your products may be priced too high.
Regardless of the factors, you need to monitor and track your ROAS. It keeps you from losing funds and helps you understand what works and what doesn’t with your target audiences and customers. Its also critically important for business relationships with superiors and record keeping in general.
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