Digital marketing, especially paid ads, be it social media ads or Google ads, can sometimes feel like a guessing game. You might feel strongly about an ad campaign and keep pouring money into it, but at the end you realize that it was not even that profitable.

But how can you be sure if your ad spend will be profitable or not? You can do that by effectively tracking your return on ad spend (ROAS). Return on ad spend is what will help you understand which ad campaign is most effective. It does that by identifying which marketing channels are most profitable for your business.

However, you must not confuse ROAS with ROI. It is easy to be confused between the two, but you don’t have to. In this post, you’ll know which strategies can help you maximize your ROAS and what is the difference between ROI and ROAS.

 

What Is Return on Ad Spend?

 

ROAS is a way to measure the efficiency of your ad campaigns. It calculates how much revenue you are generating for every dollar you spend on advertising.

Yes, click through rates are important but they are not an effective way of measuring if your money is being spent effectively or not. You can have high CTRs but not drive sales, this means that your ad campaign is not working as efficiently as it should, financially.

Return on ad spend is like an investment. For example, let’s say you invested $5 of your money and got $10 in return, this means that you have a positive return on ad spend. But if you only get $3 in return, your ROAS is negative.

ROAS is used to measure the revenue generated by an ad campaign. If you want to calculate your return on ad spend, you can easily do that using the formula;

 

ROAS = Revenue Generated ÷ Advertising Cost

 

Let’s say you spent $5000 on an ad campaign and this particular campaign generated $20000 in revenue. Now, put these values in the formula.

 

ROAS = 20000 ÷ 5000

 

Your return on ad spend will come out to be $4 for every $1 you spent on ads. This would be displayed as 4x ROAS. 

 

Difference Between ROAS and ROI

 

Return on ad spend, as said earlier, is a measure of how financially profitable your ad campaign is. On the other hand, return on investment is a measure of calculating the profit you gain from an investment against the total cost. The higher the ROI, the more profitable your investment. Here’s how you can calculate your ROI.

 

ROI = (Profit −Initial Investment /Initial Investment) × 100

 

Let’s take the values we used in the previous example.

 

ROI = (20000 −5000 / 5000) × 100

 

This means that you earned three times of your initial investment. This would be displayed as 3x ROI.

 

What is Considered A Good ROAS?

 

4:1 is considered a good ROAS. This means that you get $4 for every $1 spent on ads. However, the ideal ROAS varies for each business. Some businesses may have a lower ROAS and still be profitable, while others may need a higher ROAS in order to be profitable. 

The average return on ad spend across various industries is 2:1. Meaning that, on average, businesses earn $2 for every $1 they spend on ads. If you think that’s low and you won’t make a profit with these margins, here are some strategies that can help you maximize your ROAS.

 

Strategies To Maximize ROAS

It doesn’t matter where you are running ads. From Facebook to Instagram and Google, every business spending on these platforms wants to craft high performing ads. They understand that high performing ads are the key to maximize their ROAS. 

High performing ads are the ones that are most compelling. It is because, the more compelling an ad is, the more conversions and revenue it will generate. Here are some strategies you can use to maximize your ROAS.

 

1- Refine Your Keywords

You should always strive to promote your ads to a larger and the right audience by focusing on keywords. This means that you should be targeting the keywords your ideal audience is using. 

If your business has a physical location, you should also use location specific or local keywords. Local keywords can be of a big city or for specific neighborhoods within the city. One such example of a local keyword can be “best fine dining restaurant in Seattle.” 

You must make sure that the keywords you are using in your ad campaigns are highly targeted long tail keywords focusing on the user intent. Here are some tips on how you can maximize your ROAS by refining keywords;

 

• List the most relevant keywords to your business.
• Monitor these keywords and any related trending topics.
• Use the trending topic with your keywords.
• Make sure you are engaging along the trending topics. Never spam the trend.
• You must also make sure you are always on top of these trending topics.

By doing this you can make sure that your business/brand is visible when and where it matters the most.

 

2- A Strong Landing Page

 

Getting your audience to click on your ad is only the beginning, it is a baby step in the grand scheme of things. It is the first step your audience takes on the journey of becoming your customers. 

However, once someone has clicked on the ad, it is your responsibility to make sure they go all the way to make a purchase. Not only that the entire purchase process should be so efficient that they are encouraged to make a purchase again.

To do this, you need a compelling landing page with a CTA placed strategically. Never put multiple different CTAs on a landing page. It’ll distract your audience from what is your desired outcome. The landing page should feel like another page of the book or the story that began with the ad. 

This means that the landing page should deliver what the ad promised. It should feel like a continuous process, just like when you flip a page in a book and seamlessly continue to read further.

Users mostly click on ads because they find them interesting. And by following through with that promise on the landing page, you increase the chance of the visitor ro make a purchase.

Ads are for attracting visitors and landing pages are to empower or persuade them to buy. This means that your landing page must include elements that build trust and persuade visitors to take action. 

These elements can be some social proof or a limited time offer or the fear of missing out. One of the best ways to do this is by displaying a timer on the landing page, showing when the sale/offer will end or if you expect to be out of stock soon.

Lastly, your landing page must have a clear CTA.

 

3- Focus On Other Issues As Well

 

One way you can increase your ROAS is by focusing on issues other than the ad itself. Issues such as your website’s loading speed or its user interface and user experience. 

This will help present a positive image of your brand in the eyes of your potential customers. It is also important to promote loyalty among them and continue the flow that began when they clicked on your ad.

If your website takes time to load or the visitor can’t navigate to what they are looking for, that is a big no no. It not only affects your overall ROAS but also promotes a negative perception of your brand in your audience’s mind.

 

4- Data Driven Decision Making

 

You can accurately identify what will truly work for you and what’ll not by grounding your decisions based on data. Know why? Because Data Doesn’t Lie much like Shakira’s hips. 

Here are some tips for data driven decision making that can boost your ROAS.

• Focus on A/B testing, but go beyond the basics. Basics such as which image or headline works better. Instead look further into user experience elements. Elements such as does a video ad convert more when it is auto played or when a user plays it? These insights will help you increase your return on ad spend.
• Take advantage of advanced analytics and deep insights. These can be knowing whether users who interact with your social media and then via email are more likely to convert or not.
• Tuning your ads based on real time analysis can also lead to higher conversion rates. Immediate adjustments to the visuals, copy, or even the platform of an ad can be all the difference between a successful campaign and a wasted budget.

By focusing on these strategies, you can make sure you are getting more than what you are spending on ads. 

 

Let Seattle Digital Marketing Help!

 

If you are looking for marketing experts to help create an ad campaign to increase your revenue and attract new customers, then Seattle Digital Marketing is all you need

We can help you develop effective ad campaigns that help achieve your marketing objectives and give you a profitable return on ad spend. Feel free to contact us and our digital marketing experts will take care of the rest.