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What is ROAS (Return on Ad Spend) and how is it calculated?

If you want to know how effective a campaign is running, then Return On Ad Spend (ROAS) is one of the digital marketing metrics that can be used to measure it.

By measuring ROAS, you can find out if what you have spent is equivalent to what you are receiving. How to? Check out the full guide in the following Digital Sasana article.

What is ROAS (Return on Ad Spend)?

Return on Ad Spend (ROAS) is one of the important metrics in digital marketing that is often used to calculate the effectiveness of a marketing campaign that is run through digital platforms.

By using this ROAS metric, you can find out whether the digital marketing strategy you are running can benefit or even harm your business.

Broadly speaking, this metric is like you invest in, of course you will expect the selling value to continue to rise so that what you spend is worth what you receive.

To measure ROAS, you can use various levels in your Google Ads account.

It starts with creating an account, creating one of the desired campaigns, grouping campaign groups as a whole, and so on.

Why is ROAS Important?

In fact, there are many other digital marketing metrics that you can apply to optimize campaigns .

But why do you still need to calculate ROAS metrics?

Without paying attention to and calculating ROAS, you certainly won’t have comprehensive information.

The information in question is to determine what changes need to be made in optimizing the performance of campaign .

Getting sales profits from advertising should ideally be the main goal of advertising, unless your focus is only on brand awareness .

Because as explained earlier that the importance of ROAS for the company is to find out whether the strategy being implemented is worth it or not. 

If you get a high Return On Ad Spend then it helps your business success. Usually this happens in connection with the launch of a new product. 

ROAS metrics can be used as a means of evaluating the choice of strategy to be implemented. 

After knowing this, then you can use more effective strategies such as pay per click or cost per action.

Thus, campaigns and strategies that are implemented will be more effective in the future and of course provide benefits for the company.

ROAS Function in Business Marketing

Now that we know what ROAS is and how important it is to calculate these metrics in campaign , let’s see what the functions of this metric are.

ROAS serves to tell you how much profit you will get compared to the costs you have spent to advertise your product or service.

Just like investing as in general, of course you also have to know how much it is worth investing in your ads.

By knowing ROAS, then you can plan the next step or strategy.

However, if the ROAS you calculated has not reached the target, then you can consider making efforts to increase the ad.

So that later it can give better results or maybe you can stop it because it will lose money.

On the other hand, if you reach your target ROAS, then you might consider extending the duration of the ad.

What is the Difference Between ROAS and ROI?

In addition to ROAS, you will likely meet and measure other digital marketing metrics, such as Click-through Rate (CTR) and Return On Investment (ROI).

If you also measure some of these metrics, then you get a display of results that will certainly be more accurate.

Return On Investment (ROI) is a metric that serves to measure the total return on the overall investment of the ongoing business.

Meanwhile, ROAS is a metric that calculates the profit you get through campaigns certain ad

Basically, ROI is a broader digital marketing metric, while ROAS is a specific metric that measures the success of a campaign particular ad

How to Calculate ROAS Figures?

How to calculate ROAS metrics is very simple and easy to practice.

You can get the ROAS figure by dividing the gross revenue (gross income) from ad campaign with the costs incurred to create campaign .

ROAS = Revenue Campaign / Cost Campaign

The difficulty that is often faced when calculating ROAS lies in getting an accurate number of revenue generated from a campaign .

Then, customer journey that the audience goes through can be very complicated and attributing sales to certain advertisements requires very detailed and comprehensive data.

Then, what factors need to be included in the calculation of the ROAS metric?

When you calculate ROAS, things that should not be forgotten are partner or vendor fees, affiliate commissions, and also the costs incurred for clicks and impressions.

Partner or vendor fees are usually incurred during the ad creation process itself.

Meanwhile, affiliate commissions are issued to pay for bidding and other costs associated with the publisher of campaign

Then, for clicks and impressions, you also have to take into account the costs that will be incurred for the strategy used. Be it cost per click, cost per impression, and so on.

What is a Good ROAS Number?

Good or bad ROAS numbers you get will depend on various factors such as the scale of the business, the purpose of the campaign, the digital platform used, and the industry or niche of your business.

For example, if the goal of campaign is to increase brand awareness, then getting campaign results from a small ROAS number is not a significant problem.

You also need to consider the profit margin from sales when setting a target ROAS.

A large profit margin allows you to continue your campaign with a relatively small ROAS.

On the other hand, if the profit margin is small, it requires campaign to have a larger ROAS.

How to Increase ROAS

After knowing how much ROAS you get from advertising, consider the following tips to optimize your ROAS.

1. Pay Attention to Figure Accuracy The

ROAS figures you get will only have benefits if they are accurate.

Therefore, the main thing that you need to pay attention to in calculating ROAS is to pay close attention to the data used.

Check again to see if you’ve included all the expenses for your ads.

Or, do you need to include offline or other indirect benefits.

2. Reduce Advertising

Expenditures campaign . Smaller

Here are some ways you can save on your advertising expenses to be more efficient.

  • Reducing the Cost of Running Ads

Running campaigns independently through digital platforms will certainly take up a lot of your time and energy. Therefore, consider using digital advertising to help you run campaigns more effective and efficient advertising

  • Have a Specific Target Audience

Having a specific target audience can reduce your advertising costs and also increase the conversion potential of those ads.

  • Run A/B Testing

Perform A/B testing to find out which ads are the most effective using the test results to disable ads that are less effective.

3. Identify Unrelated Ads

Low ROAS can be caused by factors outside of campaign your ad

For example, if your ROAS is low but your sales are high, your product price may be too low.

Or, if your ROAS number is low but has a high CTR, your ad could be experiencing some of the following:

  • It’s unethical to write ad copy
  • Landing page is of poor quality
  • Call To Action (CTA) is not clear
  • process checkout is too long or difficult understood
  • Product prices are too expensive

Conclusion

Overall, ROAS is very important to evaluate the performance of campaigns and how they contribute to your company’s profits. Through careful monitoring of ROAS, your company can make the right decisions.

Like investing in advertising costs through what platforms and how you can develop your company to be more effective and efficient. Also, it’s important that you look at other data and metrics to get a complete picture of ROAS.

By knowing the ROAS of campaigns , you can also find out campaigns are generating profits and which need updating to improve their performance.

 

 

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