Return on Ad Spend (ROAS)
What is Return on Ad Spend (ROAS)? Return On Ad Spend, or ROAS, is an efficiency metric that helps advertisers understand how their campaigns are performing by measuring the revenue earned compared to the money spent to run the campaign. ROAS is represented with a ratio, for example, 3:1, where a company earns $3 for every $1 spent. Typically, the higher the ROAS, the better. However, there are some exceptions, especially if a company is looking to grow or scale their customer base. ROAS Calculation ROAS is calculated by dividing the revenue generated by a campaign by the cost of running that campaign. For example, if you spent $1,000 on a campaign that generated $4,000 in revenue, you divide 4,000 by 1,000 to get 4:1. What Is a Good ROAS? A good ROAS depends on quite a few factors, but commonly, companies aim for a 3:1 ROAS. With a ROAS of 3:1, most companies are profitable. However, ROAS doesn’t always need to be calculated (or understood) as a campaign efficiency metric. It can also tell advertisers how they’re performing on each marketing channel. Each company requires different ROAS thresholds depending on their goals and the tactics they’re using. To find the right ROAS for your company, consider what ROAS you need for each campaign, each channel, and an overall ratio. How to Improve ROAS Companies can increase ROAS in several different ways. The fastest ways to improve ROAS include: Optimize the audience segments being targeted by the campaign. Often, targeting people based on real-world behavior, like in-store visits and previous purchase behavior, results in better returns than online browsing alone. Try a more comprehensive media mix. Based on the goals of the campaign, certain advertising channels will drive better results. Consider adding different channels to your campaign if you’re trying…