Getting the right balance between the paid and the non-paid efforts in your marketing can be tricky; however, by working out the return on ad spend (ROAS), you can calculate the best avenues to really make your marketing dollar go further, and give you a better handle on what’s working.
Your marketing budget is limited. That’s a given. And if you’re running a business, you’re probably always looking for ways to get the most bang for your buck. With marketing, this means getting the most out of your ad spend. So, what exactly is a good return on ad spend?
The truth is, there’s no hard and fast rule. Some businesses may judge ROAS by ad click, others by conversion rate.
Still, others will look at their overall revenue and base their ROAS on that. It’s really up to you and how your company measures success.
So, as a company, you need to look at what you want to measure and go from there.
There are many factors that affect your return on ad spend, including the type of ad you are running, the ad platform you are using, the content of your ad, your targeting, the type of customer you are trying to reach, and more. Understanding these factors will help you to make better, more informed decisions regarding your ad spend.
The factors that influence your return on ad spend can fall into one of two categories: factors that you can control and factors you can’t. There are factors you can’t control, such as the popularity of your business or industry, can be very difficult to predict and can affect your return on ad spend. The factors you can control, such as the size of your ad and the type of ad, can greatly influence your return on ad spend and therefore your bottom line.
ROAS is calculated by dividing the amount of revenue generated by the amount of money spent on advertising. The ROAS is the performance of your ad campaigns in relation to the amount of money you’re spending on them.
If you’re spending $100 on an ad campaign that’s bringing in $1,000, your ROAS is 10 percent. That’s a good ROAS. If you do a $100 campaign that brings in $500, that is a 5 percent ROAS. A $100 campaign that brings in $100 is a 1 percent ROAS. A $100 campaign that brings in $0 is a 0 percent ROAS, which is the worst.
As per the latest statistics, the average online business loses about $1,000 on every new customer that they acquire. That’s because most small business owners don’t know how to effectively maximize their marketing budget. Instead of investing their money on online ads, most business owners focus too much on the marketing campaign and not enough on the return on ad spend (ROAS).
You may think you’re getting a good ROI when your advertising cost is only 10 percent or 20 percent of your overall marketing budget, but in fact, it doesn’t tell you anything about whether or not your efforts have been successful at all.
The reason why this is so crucial is that if you have an effective plan for increasing sales from your website, then even though your ROAS isn’t great, your results will still improve over time as more customers buy products from your site. In other words, while having a high ROAS might mean that your advertising dollars aren’t going to waste, it also means that there’s no guarantee that your profits will increase over time.
If you want to get better returns on your ad spending, you need to put a clear focus on improving your ROAS by setting up specific goals for each channel that you use for marketing.
For example, one goal could be to generate 1000 leads through Facebook ads alone; another goal could be to drive 100 clicks to your eCommerce store; yet another goal could be to convert 50% of these visitors into repeat buyers.
If you set out clearly defined objectives like this, then you’ll be able to see which channels work best with what type of businesses and websites. This way, you won’t end up wasting any money unless you actually achieve something worthwhile.
When companies try to optimize everything at once, without doing proper research first, they often find themselves losing money rather than making money.
When you look at different types of campaigns such as social media, email marketing, paid search, etc., you’ll notice that some methods tend to perform better than others depending on who you target and what kind of product/service you sell.
This is simply due to demographics: younger audiences respond well to certain kinds of content whereas older audiences prefer videos and infographics. So before launching any massive scale campaign, do a thorough market analysis and segmentation to determine where your audience hangs out online. Once you’ve identified those areas, then build strategies around them.
One problem many advertisers face is that they assume that just because they spent X amount of money on their last campaign, therefore it must have generated Z number of conversions. As we mentioned earlier, however, this assumption is completely false.
Just because someone spends $25k on Google Ads doesn’t necessarily mean that he’s generating 25K qualified traffic to his site. There could be hundreds of thousands of potential consumers visiting Google every day, so it would take months for him to reach that level of exposure.
While it’s true that he did pay for his advertisement, that doesn’t mean that he got exactly what he was paying for. He likely didn’t receive anywhere near that many visits or orders.
Your marketing budget is one of the most important parts of your business. If you are not getting the biggest bang for your buck, you are not doing yourself any favors. Hopefully, this blog post was able to help you learn how to get the most out of your marketing budget, by maximizing your return on ad spend.
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