Last Updated on
Return on advertising spend (ROAS) is a metric used to measure how efficiently a digital marketing campaign is running. ROAS lets marketers assess which of their efforts are working and which ones need some improvements.
You can use the following formula to calculate your ROAS: revenue from ad campaign / cost of ad campaign.
ROAS is a similar business metric to ROI (return on investment). And while some marketers use the terms interchangeably, they are not exactly the same.
ROAS Versus ROI – What’s The Difference?
Tim Mayer of Trueffect: “ROI optimizes to a strategy while ROAS optimizes to a tactic…ROI measures the profit generated by ads relative to the cost of those ads. It’s a business-centric metric that is most effective at measuring how ads contribute to an organization’s bottom line…
In contrast, ROAS measures gross revenue generated for every dollar spent on advertising. It is an advertiser-centric metric that gauges the effectiveness of online advertising campaigns…
With ROAS, marketing is considered a necessary cost of doing business vs. ROI, where marketing is an investment to grow a business’s profits incrementally.”
That said, what can marketers do to increase their ROAS?
How To Maximize Your ROAS
Seeing as there’s a lot of competition out there and consumers are both price savvy and price-conscious, maximizing your return on ad spend is important. Here are some tips on how to do it:
Choose The Best Online Channels And Campaigns
When you advertise online, you have the potential to reach millions of consumers. In order to capitalize on this potential, however, you need to understand how your target market uses the web, including for how long, says Nielsen.com. Then, you need to adapt your ad campaigns accordingly.
Be Consistent Across Media Channels
It doesn’t matter which type of media is being consumed; your brand message needs to be consistent. The only change you should make is to tailor your message to better suit the way consumers interact with specific forms of media.
Offer Premium Giveaways
This tactic obviously involves more costs up-front. But according to Chang Park of Nielsen Analytic Consulting, “An expensive giveaway can deliver better long-term sales volume because of the perceived value to shoppers.”
Monitor The User Journey
It starts with a click. But the user journey doesn’t stop there. And you don’t want to have your ideal customers click your ads only to have them fall off the process later on. Campbell Brown of PredictHQ suggests asking the following questions to make sure your user journey flows as it should:
- “What happens when the user clicks through from mobile, tablet or desktop? Are all the pages optimized for the relevant screen size?
- What does your landing page communicate above the fold? Do you have a clear call to action?
- How fast does your page load?
- If the customer abandons the process, what steps do you have in place, e.g. re-marketing campaigns or abandon cart/form triggered emails?
- If they do become a customer, do you place them into an onboarding process to mitigate churn and stimulate activity?”
Get The Timing Right
Events like holidays, sports, conferences, and concerts can all affect your business in terms of your digital advertising’s effectiveness in terms of timing. To help with this, a useful tool to check out is the PredictHQ web app.
It allows you to understand which events have the highest probability of impacting your business and when the average customer is most likely to purchase in relation to those events.
What do you think about these suggestions for improving your return on ad spend? Do you have any other advice that you can share?