July 7, 2020

If you’re searching for a reliable way to improve your pay-per-click ad campaigns, you may have heard the term ROAS before. 

As most marketers already know, making the most out of advertisement strategies means carefully considering everything from revenue to ad spend, with a close consideration of vital metrics. You need to be able to track each campaign that you create and determine its effectiveness. If you aren’t generating any profit from your ads, they’re not going to be effective.

ROAS is one of the most important marketing metric options to consider when you’re looking into return on investment. Otherwise known as “return on advertising spend,” this metric is a way to connect the amount you spend on any PPC marketing efforts to the revenue generated on that campaign. The ROAS metric is a key tool in avoiding higher advertising costs and increasing ad revenue.

Today, we’re going to show you how you can make the most of your digital advertising strategy by calculating ROAS.

How to Really Understand ROAS

ROAS is a short term for return on ad spend. It’s a common marketing campaign metric used to help marketers understand how much revenue they get per dollar spent on advertising. With ROAS, you discover how effective your online advertising campaigns are so you can determine whether you’re using your ad budget properly. 

ROAS is very similar to another total revenue metric called ROI. Return on investment evaluates the effectiveness of all of your marketing efforts. On the other hand, ROAS is all about identifying the profitability of a specific campaign. If you want to know which paid search campaigns or AdWords ad to focus on with your bid strategy, ROAS can help with that. 

The biggest difference between ROI and ROAS is that ROAS is a ratio that you consider by comparing how much you spend on your search ad, to how much total revenue you earn back. On the other hand, ROI accounts for the amount that you make after paying the expenses and cost of goods. 

How to Calculate ROAS

If you want to improve your insight into the revenue generated from your digital marketing campaigns, then you need an insight into how to calculate ROAS. 

The first thing you need to do is track down the sales information of your ad campaigns. You can usually do this by heading into your AdWords account. If you’re using Google Ad campaigns for your main marketing channel, then the analytics available there will help with calculating ROAS. 

Get the information that you need to measure ROAS from the Google Ads dashboard. You’ll need to find out the profit margin of your ad, as well as the cost of what you paid for the paid search campaign. Once you have those two numbers, all you need to do is find the number that you get when you take revenue away from cost and divide the number. 

Your ROAS calculation strategy may start with a formula like this:

(Revenue-Cost) / Cost

How to use ROAS to measure campaign effectiveness

So, once you’ve got another number to use when calculating the success of your advertising campaign, how do you make the most of that ROAS figure?

ROAS is valuable to advertising efforts because it helps marketing professionals understand how particular ad campaigns contribute to the brand’s bottom line. Without ROAS, you would simply be guessing at whether your ad is generating a higher amount of revenue than cost. When it comes to how you can use ROAS, the metric will give you a handy insight into multiple sections of the online marketing landscape, including marketing direction and strategy. 

If you discover that a specific campaign has a high ROAS, then you can investigate why this ad campaign generates more revenue than its counterparts. This could be useful in the future, as it will tell you which search campaigns can lead to a higher conversion rate for your eCommerce business. Your ROAS can also give you more insight into your conversion tracking strategy, so you can better serve your audience while making more money. 

ROAS also helps you to identify better ways to allocate your marketing budget. If you learn that one ad campaign has a low ROAS, you could decide that you’re going to reduce your bid strategy in that area. Companies have guidelines to consider on their marketing budget, and ROAS can be a valuable way to bring the cost of your AdWords ad groups down while increasing your profit. 

How to Improve ROAS

Once you’ve finished your ROAS evaluation, the next step is to figure out how to use it to improve your marketing strategy. Calculating ROAS is a straight-forward process. However, if you want your eCommerce business to thrive thanks to your advertising campaign, then you need to make sure that you’re actually increasing ROAS. 

Here are some top ways to increase the revenue that you get back from your ad spend to help you get started.  

  1.   Improve Your Site’s Mobile Friendliness

No matter how compelling your PPC ad campaign is, you’ll be unlikely to capture your audience’s attention if your website isn’t mobile-friendly enough.

More of today’s consumers are beginning to browse and shop online. With that in mind, it’s crucial to make sure that you have a website that’s designed to appeal to your customers on any device. Even Google, the leading search engine, will choose how to rank your business based in some part on how mobile-friendly your site is. 

To ensure that you’re giving your customers a mobile-friendly shopping experience, and reducing cart abandonment, make sure that you:

  • Speed up your website by removing any large files or plugins.
  • Use location-based services to deliver personalized content.
  • Use design elements to de-clutter product and checkout pages.
  • Simplify the checkout process as much as possible.
  • Keep buttons large and easy to click.  
  1.     Look At Your Competitors

 While no business should ever simply copy and paste what their competitors are doing, it can be helpful to check out other companies on social media and search and find out which keywords they’re bidding for. 

Your competitors are aiming to attract the same customers as you are. Examining what they’re doing in their latest advertising campaign is a great way to figure out whether you’re missing anything from your strategy. There are plenty of sites like SEMRush and Ahrefs that can help you to figure out what your competitors are ranking for, and which ads are driving the most click-through rate. 

You could also use your competitor analysis to look for AdWords keywords that your competitors aren’t targeting, to see whether you can add ideas to your negative keywords, or even serve an under-appreciated market. 

  1.               Improve Your Keyword Targeting 

 Your keyword targeting needs to be super specific if you want to attract visitors that are looking for the same product that you’re advertising. This means that you need to research your eCommerce industry, get to know your audience, and ensure that all of the right pages are optimized to boost the chances of your customers making a purchase. 

Optimize each product or landing page with high-quality long-tail keywords that are more likely to convert. High competition keywords are more likely to be difficult to rank for. However, if you can opt for long-tail keywords, there’s more of a chance that your customers are further along the buyer funnel. For instance, try “Marketers near me” instead of just “Marketers.” 

You can use PPC discovery tools for your advertising campaigns and Google analytics to get some extra help for keyword targeting. 

  1.               Use Geo-Targeting

 If you have a local business, then there’s no point in ranking for clicks from people who live thousands of miles away. The same applies to marketers that have an ecommerce business that can only ship to specific companies.  

One of the best ways to make sure that you’re getting the most profit from your ad spend is to ensure that you’re only targeting the people that you can actually sell to. The good news is that Google AdWords does allow you to focus your keyword targeting efforts on the people who initiate their search from specific geographic areas. 

You can even go as far as to use your geographic targeting to make sure that you’re sharing more relevant ad copy with different ad groups based on where they are. Using more relevant and local messaging could improve your click-through rate. 

  1.               Remember Negative Keywords

 One of the best ways to reduce ad spend and improve ROAS is to add negative keywords to your attribution model. Negative keywords are the phrases that you don’t want your ad to appear for. For instance, if you’re exclusively selling women’s shoes on your ecommerce site, then you don’t want your ad to show up for the phrase “men’s boots.” 

You could also decide that you don’t want to appear for things like “cheap” or “hiking” too. Using negative keywords is good for your return on investment because it improves the relevancy of the traffic that you collect from your ad campaign. This reduces your ad spend as a result and improves your ROAS. 

  1.               Optimize Your Landing Pages

 Most advertising efforts will tell you that getting search engine customers to click on your ads is just part of the battle. If you want those people to convert, and to see an improvement on your ROAS, then you need to ensure that your landing pages are properly optimized. 

If you’re currently sending everyone from your ad groups to the same landing page, reevaluate your strategy. The landing page that you send your PPC leads to needs to align with your customer’s needs, and the messaging that you’ve used. Your page should feature content that delivers a smooth transition from your ad copy. 

If your ad is for an offer that allows your customer to buy one product and get another for free, for instance, then it should be leading to a page that demonstrates the same offer. One good way to test your landing pages is to A/B test them. This helps you to better understand what actually resonates with your audience. 

  1. Don’t rely on Broad Match too much

Using a broad match for your Google ad campaigns can give you a good insight into which of your keywords deliver the best return on ad spend. However, you can end up spending a lot of money on your testing alone.

Start by using your broad match strategy to get an insight into which keywords are more likely to convert your customers. From there, you can begin to reduce your reliance on broad phrase match in your ad groups. 

There’s nothing wrong with starting your ad campaign with some testing. Remember, different ad groups will expect different things in your advertising. However, if you’re relying too heavily on broad match constantly, then this could lead to some serious problems with your ad spend. 

  1.               Adjust Bids Based on Device

 Another excellent tip for improving ROAS is to simply adjust your bids according to the device that you’re using Google AdWords. Then you’ll be able to set different bids on certain keywords based on different mobile devices and desktop computers. 

Remember, most mobile device users are becoming more comfortable with the idea of using their mobile phones to shop these days. It used to be a good idea to reduce your big keywords for mobile phones in the past. Now that more people are shopping without switching to their desktop, you might discover that more of your audience prefers mobile campaigns. 

The only way to know for certain how much you should be spending on mobile vs. desktop is to look at your Google analytics. As well as showing you which keywords are leading to sales and what your cart abandonment metric looks like, Google displays other stats. It can give you a closer insight into where your customers are browsing from, and which devices they’re using.

While you’re working on making your ad campaign relevant to mobile or desktop users, don’t forget to adjust your bids based on location and time too. Look at the location data of your current campaigns and ask yourself whether certain areas are converting more than others. If they are, then it might be worth using long-form keywords with geographical words in them. For instance, “Best plumber in New York.” 

  1.               Boost the Quality Score of Ads

 Finally, the better your quality score is for your Google ads, the lower your cost per clock will be, and the better your ROAS results. With that in mind, it’s essential to work on your quality score whenever you can. Google uses your ad quality score to determine where you should rank. A large part of the formula for campaign quality score is the relevance of your advertising.

If you want to boost ROAS, then start by structuring your campaigns to reach out to smaller, more targeted ad groups. This will help to ramp up the number of sales that you get, as the keywords will be more relevant to the specific needs of the customer in each ad campaign. 

Once you have restructured your marketing groups according to their specific needs, focus on optimizing your ad copy for keywords too. If you want to increase the click-through rates of your ads, then you need to make sure that the ad copy will appeal to your audience. Don’t just concentrate on including the right keyword in your advertising campaign; make sure that you’re addressing a crucial pain point or need for your audience.

Improving Your Return on Ad Spend

Ultimately, ROAS or return on ad spend is a crucial part of understanding how valuable your campaigns are, and what your customers need from you. It’s often overlooked by beginner businesses who believe that the only thing they need to track is a full return on investment. 

But as valuable as ROI can be as a metric, it can also provide too broad of an overview. By looking at ROAS and examining the potential of each ad individually, you can make sure that you’re spending the right amount of cash on the right ads. That way, you have the best possible plan for figuring out which campaigns will deliver the best result

Improving ROAS not only boosts your chances of reducing the cost of your campaigns, but it can also mean that you get bigger profits, too, by ensuring that you’re appealing to the right people with the right content. The next time you’re working on improving your ad campaigns, don’t underestimate the value of calculating ROAS. 

You can use the tips above to improve your score and learn so much more about your audience too. 

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