What Exactly is ROAS? How ROAS Can Aid Your Marketing Efforts

What Exactly is ROAS? How ROAS Can Aid Your Marketing Efforts

Do you know “What exactly is ROAS? How ROAS can aid your marketing efforts? There are a lot of marketing metrics to be aware of, but none are quite as important as return on ad spend (ROAS). Measuring your ROAS provides a comprehensive analysis of all your marketing techniques in a straightforward calculation. You can also use it to analyze your advertising strategies and discover the most beneficial ones. 

What Is Return on Ad Spend?

Return on ad spend is a relatively basic calculation showing the profitability of your marketing campaigns. The formula is simple and requires you to divide the total revenue earned from your campaigns by the cost you paid for them.

You can evaluate your ROAS based on specific time periods, like a month, a quarter, or a year. You can also apply it to specific campaigns and even particular marketing techniques.

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For instance, you might evaluate your monthly ROAS for all your marketing activities, then calculate it across separate campaigns. You can even dive into the details and determine the profitability of using specific keywords in a PPC strategy or a single social media ad.

There are a few moving factors to be aware of when calculating ROAS. First, you’ll want to attribute the returns from your ad spend appropriately. If you cannot track whether a customer’s purchase resulted from an ad they saw or from some other factor, you won’t have an accurate ROAS.

Similarly, you’ll need to calculate every dollar that went into your advertising strategy. That includes the money you spent on the actual ad’s placement, the time you spent creating it, the resources you used, and any other associated marketing expenses.

For some smaller organizations, ROAS will be very easy to calculate. However, larger companies with more complexity will likely need to spend more time determining the elements of their ROAS formula.

How ROAS Can Aid Your Marketing Efforts

Once you begin tracking ROAS, you’ll find it easier to optimize your marketing strategies for the best results, especially in specialized fields like digital marketing for lawyers. There are a few reasons why knowing your ROAS is highly beneficial in honing your marketing efforts.

Know Where You’re Succeeding and Where You’re Not

A well-performing marketing campaign has its underpinnings in strategy. It doesn’t consist of random ads placed anywhere and everywhere to generate clicks or likes. Instead, the marketer will define the campaign’s objectives, how much they’re willing to spend, and the creatives they’ll use to achieve them. 

Once a marketing campaign begins, tracking the results over its length is critical. At the end of a campaign, you’ll want to understand how it performed and how you can optimize for the next one. 

Allocate Your Marketing Budget Toward Proven Techniques

When you know what strategies work best for your company, you can put more money toward those strategies. You’ll waste less of your budget on useless techniques that don’t result in leads or conversions.

A powerful marketing strategy that yields strong results will give your company the foundation it needs to move confidently toward future initiatives.

Use Your ROAS to Establish New Goals

Once you understand which campaigns are the most successful, you can use the ROAS to benchmark your future objectives. For instance, if your dynamic remarketing social media campaign yielded $4 in revenue for every dollar spent, you can set that figure as your benchmark. Any returns above that amount would be icing on the cake.

Similarly, you could use ROAS to evaluate the effectiveness of any new techniques you try. If the resulting ROAS exceeds that of your most successful campaigns, you’ll know you have a winner that you want to add to your marketing toolkit. 

Conversely, if the ROAS is less, you’ll know you either need to tweak your strategy or abandon it and return to your star performers.

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Final Words

A well-designed marketing strategy incorporating key metrics like ROAS allows you to be a better decision-maker. Instead of haphazardly trying out new marketing activities, you can select the ones that work best for your organization and stick with them. You’ll refine your marketing budget so it goes toward effective techniques rather than unproductive ones.

When you regularly measure ROAS, your marketing team will have a metric to show off to the executives who approve the marketing budget. When the team is continuously striving toward results that garner revenue, executives will be more likely to grant a larger budget or increase the size of the team. That means you’ll have more money to devote to marketing activities in the future.