Tailored Campaign Strategies to Boost ROAS

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For retailers spending money on PPC ads to drive traffic to your eCommerce website, keep in mind that getting the clicks is only half the story. If your ads aren’t effective, they will fail to generate profit.

Do you do know how much revenue your ads are bringing in and whether they’re worth the investment? One of the best ways to find out is to connect the amount you spend on a campaign with the amount of revenue generated.

For example, if there were a slot machine that gave you $5 every time you put in $1 and pulled the lever, would you keep putting money in? The answer is simple. Of course, you would!

Measuring ROAS (return on ad spend) tells you exactly which ones of your PPC ads are magic slot machines, so you can get the most out of your online advertising dollars.

What is ROAS?
What is ROAS and ROI?
What is a Good ROAS Percentage?
What Should be ROAS?
ROAS Calculator
Facebook ROAS Optimization
How to Express ROAS
Why is ROAS Important?
How Can I Maximize my Ad Spending?
What is a Good ROAS For Facebook Ads?
How to Forecast ROAS
ROAS Amazon
What is a Strong ROAS?
How to Improve ROAS
What is ROAS Formula?
10 Tactics to Help Improve Your PPC ROAS
How do You Optimize ROAS?
What is a Good e-commerce ROAS?
How Can I Increase my ROAS?
Facebook ROAS Benchmark
What is a Good Social ROAS?
How do I Increase my Amazon ROAS?
What is a Good ROAS on Amazon Ads?
What is a Profitable ROAS?
What is ACOS?
PPC ROAS
What is a Good ROAS Number?
What ROAS Should You Aim For?
Metrics For Google Ads

What is ROAS?

Return on ad spend is a ratio of how much revenue you generate per every dollar spent on advertising. ROAS is a measure of spend efficiency, allowing advertisers to track and compare their ad campaigns’ effectiveness.

On the surface, the ROAS calculation is simple: the total revenue generated directly from the ad campaign divided by the total campaign cost.

For example, if you spend $5,000 on a PPC ad campaign and generate $15,000 in direct revenue from those ads, you would have a ROAS of 3:1, or $3.

What is ROAS and ROI?

ROI optimizes to a strategy while ROAS optimizes to a tactic, yet some marketers use these terms interchangeably. 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.

ROI = profits-costs x 100 / costs

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.

ROAS = revenue from ad campaign / cost of ad campaign

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. While using both metrics in tandem is useful, the pendulum is swinging back from the widespread use of the ROAS-focused model in digital advertising, to a more rigorous ROI-focused model.

What is a Good ROAS Percentage?

No matter how you calculate ROAS from Google Ads, whether with a calculator or pen and paper, it’s crucial to understand how ROAS gets calculated. It helps you know what ROAS measures, as well as whether you earned a positive or negative ROAS from Google Ads.

The ROAS formula is:

ROAS = Total Ad Revenue / Total Ad Spend

In some cases, you’ll see the ROAS formula formatted as follows:

ROAS = Total Ad Revenue / Total Ad Spend * 100

This formula formats your ROAS as a percentage by multiplying your result by 100.

If you use this version, know that a positive percentage, like 50%, doesn’t equal a positive ROAS because you’ve only earned 50% back on your investment. Your ROAS must exceed 100% for your business to make a return on its ad spend.

What Should be ROAS?

A “good” ROAS depends on several factors, including your profit margins, industry, and average cost-per-click (CPC). Most companies aim for a 4:1 ratio — $4 in revenue to $1 in ad costs. The average ROAS, however, is 2:1 — $2 in revenue to $1 in ad costs.

When it comes to determining a good ROAS for your company, you need to think about the following:

Your industry
Your profit margins
Your average cost-per-click (CPC)

Once you figure out these details, you can uncover the optimum dollar amount for your business.

ROAS Calculator

Use the ROAS formula, which divides your ad strategy’s total revenue by its total cost, to calculate your ROAS:

ROAS = Revenue / Cost

With this formula, your team can find your company’s unique ROAS value by determining the following:

The total revenue (in a dollar amount) generated by your ad strategy
The total cost (in a dollar amount) of managing your ad strategy

Once you have those two pieces of data, divide your total revenue by your total cost, and voilà!

Your ROAS is expressed as a dollar amount and represents what your company earns back (on average) for every dollar spent on your ad campaign. If yours equaled $5, for instance, that would mean your business earns $5 for every $1 spent.

Facebook ROAS Optimization

Value optimization with a minimum return on ad spend (ROAS) bidding lets you set the lowest acceptable return on ad spend, giving you more command over the value that a campaign accrues to your business. After establishing a minimum return on ad spend, our platform will automatically adjust your bids to deliver a return of at least that value or more over the duration of the campaign.

How it works

Define your minimum ROAS – the lowest return on ad spend you are willing to accept – and our platform will adjust your bids in real time to stay above this floor.
To optimise for ROAS, our system observes values passed by your Facebook pixel or mobile SDK, and for minimum ROAS bidding to work effectively, purchase values must be passed back.
Based on these values, we estimate how much a person may spend over a one- or seven-day period.
Our platform optimises ad delivery to audiences that are likely to help you achieve at least your ROAS floor.
Your minimum ROAS value will influence our system by adjusting the bids so that the ROAS performance will always be above your minimum ROAS value.

How to Express ROAS

ROAS seeks to identify the ratio of dollars invested in a particular advertising tactic to the revenue or profit that it produced.

Often ROAS is presented as a ratio, a percentage, or a dollar value.

Imagine an online retailer spends $1,000 on a pay-per-click advertising campaign with a popular search engine. If the campaign generates $10,000 in profit, there is a 10:1 ratio between the amount invested and the amount returned.

ROAS = 10:1

This same ROAS could also be calculated as a percentage. To do this, we would divide the profit by the advertising spend and multiply by 100.

(10,000 / 1,000 = 10) x 100 = 1,000%

While both ROAS as a ratio and ROAS as a percentage are popular ways to present this data, they may be difficult to think about when you start to compare advertising tactics. So some marketers state the ratio in terms of dollars and cents in an effort to make ROAS more tangible.

To get a dollar amount, simply state the profit portion of the ROAS ratio as such, to show the amount of profit generated by a single dollar.

10:1 = $10

However you choose to express ROAS, it can help you decide which advertising campaigns or tactics are returning the most relative profit or revenue.

Why is ROAS Important?

ROAS is an essential metric everyone who advertises online should monitor. It is not the only metric you should be monitoring, but it gives you a very good idea regarding your ad performance.

Measuring your ROAS has 3 main benefits:

1. Identifying scaling opportunities

ROAS allows businesses to evaluate the effectiveness of individual campaigns based on their performance.

Examining each campaign individually helps a business to find out the type of ads that are performing well so they can scale them to maximize results.

You can run multiple campaigns and as you assess each of them, you can capitalize on the campaigns with the highest ROAS to increase your revenues.

Campaigns and ad sets that drive high ROAS for you can be scaled in order to drive more profits.

2. “Trimming off the fat”

Once you measure the performance of each of your active ads, you can optimize your campaign budgets.

Spending much on ads does not always translate into higher revenues. However, spending wisely on your best-performing ads can drive more sales and grow your revenues significantly.

ROAS calculation results are valuable in assisting you to identify the ad sets and campaigns on which you are overspending. In these cases, you need to reduce your budget to protect your business from losses.

If you advertise on Facebook, for example, it is recommended that you set up Automated Rules on the Facebook Ads Manager or use Madgicx’s Automation Tactics to reduce budgets or turn off ads and ad sets which drive low ROAS.

You can then allocate these budgets to the campaigns and ad sets that drive good ROAS and are ready for scaling.

3. Refining your marketing strategy

Successful marketing strategies are based on facts.

That is a fact.

ROAS is your right hand in digital advertising. It will allow you to assess the effect of an individual campaign on your business.

This metric provides you with reliable information to make important decisions regarding your next marketing actions.

You can easily find out which campaigns outperform the others and you can align your marketing strategies along these lines to maximize your future profits.

How Can I Maximize my Ad Spending?

1. Review its accuracy

The last thing you want to do is scrap a campaign with great potential only because you’re not tracking your ROAS accurately.

So, your first step in tracking ROAS should be reviewing the data you’re using to calculate the metric. Are you considering all the costs of your advertising? Are you including offline sales and other indirect revenue?

Also, what Google Ads attribution model are you using?

First or last-click attribution models can skew ROAS and make a successful campaign look ineffective. Ensure you are using an attribution model that’s appropriate for your campaign.

Plus, when calculating ROAS, you must only consider advertising costs and not other costs like order fulfillment. Including other costs will make your ROAS lower than it actually is.

2. Lower the cost of your ads

Looking at the equation, if you can lower your campaign cost, you can boost your ROAS.

While the cost depends on your ad goals, targeting and other factors, here’s what you can do to try and lower your ad costs:

Reduce labor costs: If you’re working with an ad agency, you could cut costs by doing it in-house. Conversely, if your in-house team is squandering way too much time, it might be time to outsource.
Use negative keywords: The average Google Ads account wastes 76% of its budget targeting the wrong keywords. So, ensure you get your negative keywords list spot on.
Improve Quality Score: Google’s Quality Score measures your ad quality, and whether your ads are relevant to the keywords they are targeting. A better Quality Score can result in a higher ad ranking and can drastically lower your costs.
Narrow your target audience: Targeting a super-specific audience can help you funnel your dollars to the audience most likely to convert. For example, on Facebook, you can target ads based on numerous demographic parameters like age, location, interests, etc.
Run A/B tests. Use automated testing to find out what works for your goals, and use those insights to drop ads that are not generating results.

3. Maximize the revenue generated by ads

Now for the other part of the equation. Here are a couple of ways to try and improve the revenue generated by your campaign:

Refine your keywords. Consider restarting your keyword research and targeting keywords with less competition to give your ad a chance to gain more clicks.
Automate bidding. If you are running Google Ads, consider using Google’s automated bid strategies to set a target ROAS.

4. Probe other issues not related to ads

A low ROAS could also be caused by issues not directly related to your ad campaign itself.

For example, if your ROAS is low, but sales are high, it could mean your product is priced too low. Or, if the CTR is high, but ROAS is low, it could mean either of the following:

The ad’s copy is misleading.
The landing page isn’t well-designed, with unclear CTAs or copy.
The checkout process is lengthy or complicated.
The product is priced too high.

As you see, there are many possible reasons behind a low ROAS, ranging from improper keyword or audience targeting to an unoptimized landing page. Consider the steps outlined above and keep an eye on other metrics to try and improve your ROAS.

What is a Good ROAS For Facebook Ads?

A good Facebook ad spend depends on numerous factors including your marketing goal, industry, and more. So having a number to look up to is futile. However, knowing the average ROAS is a good way to set a benchmark for yourself.

But what’s the average ROAS you should look up to?

Over 30 respondents who we surveyed share 6-10x is their average return on ad spend. A close majority also say 4-5x is their average ad spend. Only about 5% say that their average ROAS is greater than 80x.

How to Forecast ROAS

In order to calculate a predicted ROAS in PPC advertising you need to know the revenue that each conversion brings for each product you’re marketing (which could be associated with the keyword, or ad-group level), the potential cost of the campaign, and a half-decent guess at what kind of a conversion rate you might achieve.

Once you know what a conversion is worth, all of the info that you need is available in rough form from Yahoo and Google’s keyword tools.

Yahoo gives us the estimated number of clicks and cost per click (CPC) for a keyword so we can calculate the expected cost of the campaign per month. Adwords give us approximate search volume along with the estimated CPC, which we can use to determine a rough estimate of traffic at different click-through-rates, and what it will cost us.

If we supply a hypothetical conversion rate to calculate conversions, and we know the company’s revenue from each conversion, we have what we need to calculate ROAS. So like I said, it gets fuzzy, but it’s still half-decent for predicted information.

These simple equations are expressed like this: To further the confusion of the ROAS metric, it is commonly calculated in two *different* ways. One way subtracts the PPC ad-spend from the revenue right in the calculation, the other way does not. Let’s look at each equation and how to interpret the results.

Method one:

With the method, one revenue of $100 and an ad-spend of $100 would produce a full return on ad spend of %100. So with this method of calculation seeing 100% ROAS simply means you’re breaking even. A 50% ROAS would mean you’re only recouping half of the ad-spend you’ve put out. With this equation in a situation where you have $200 revenue and $100 ad-spend, doubling your ad-spend is expressed as an ROAS of 200%.

Method two:

In this formula the cost is subtracted from the revenue, forming a profit metric that is relative to the ad campaign. Plugging the same numbers into this, $100 ad-spend with $100 cost, break-even comes out to 0% ROAS. With this equation, in a situation with $200 revenue and $100 ad-spend, doubling your ad-spend is expressed as and ROAS of 100%.

Be sure you know which type of ROAS you’re looking at, because obviously, the interpretation is different for each.

ROAS Amazon

All businesses have a target on how much of their profit they want to spend per sale on ads. You need to make this decision for your own business.

The average RoAS on Amazon is around 3x. This will change based on your industry, strategies and goals. For example, Consumer Electronics has a RoAS of around 9x whereas Toys and Games have a RoAS of around 4.5x.

These averages, however, conceal some other differences. For example, auto campaigns and broad match/phrase match bidding strategies will have a lower RoAS compared to a diligently targeted exact match campaign.

It also depends on where your product is within its lifecycle and the amount of competition in the market. Particularly when it comes to highly-competitive markets, you will simply have to allow for higher ad spends in order to win bids.

As a rule of thumb, a RoAS of around 6x is a good starting point — or an ACoS of 16.6%. But this is a very vague benchmark that you need to review within the specific context of your ad campaign.

What is a Strong ROAS?

There is no such thing as a good ROAS since every brand looks at the metric differently. For some brands, a value of 4:1 is outstanding. Others would consider this a failure. Comparing a good or bad ROAS depends on the profit margins of the offered product or service, the industry, and the advertising channel.

A big profit margin shows you can afford a low return on ad spend. Conversely, a small margin means you need advertising costs to be low so your goal will be a higher return on ad spend.

Just as conversion rates vary across industries, return on ad spend varies across different industries and channels.

Looking at available conversion data, advertisers struggle to reach audiences with meaningful content. This also has an impact on the metric. For Google Ads users, the average conversion rate across all industries is 4.40% and 0.57% for search and display, respectively:

Google average conversion rate by industry

For Facebook, the numbers are higher at 9.21%:

facebook-average-conversion-rate-postclick

Your campaign’s conversion rate helps predict the value of return on ad spend. However, there is a distinction between the metrics–conversion rate measures action, not revenue in dollars.

Another metric closely related to ROAS is ROI and most advertisers use the two terms interchangeably. Both metrics deserve attention in the bigger advertising picture but measure different values.

How to Improve ROAS

To improve the metric, dig deeper into your targeting, its accuracy, and ad costs.

Check ROAS accuracy

The first thing to do for a low ROAS value is to review your metrics. Have you considered all the advertising costs? Is your attribution model accurate?

First or last-click attribution models can impact the metric since they can make a successful campaign look unsuccessful. Ensure you are using an attribution model that makes sense for your campaign. Another essential aspect to check are costs outside of the immediate advertising costs, since these can skew the final value.

Lower ad costs

ROAS comprises two things–the cost of ads and the revenue they generate. So, by lowering ad costs, you can increase the metric.

Review negative keywords: The average Google Ads account wastes up to76% of its budget on the wrong keywords. Add the right negative keywords to only incur ad costs for the right audiences.
Improve Quality Score: For Google Ads campaigns, a better Quality Score results in a higher ad ranking. This helps improve revenue and reduce wasted ad spend.

Improve ad revenue with relevant landing pages

In tandem with lowering ad costs, improving ad revenue should also be a priority. You can achieve this by connecting ads to relevant post-click experiences.

When intent and relevancy match audience expectations, you decrease cost-per-click and increase advertising conversions.

Create landing pages at scale for all your ads to give a personalized experience to visitors, increase conversions, and return on ad spend.

What is ROAS Formula?

Because ROAS is such an important and powerful metric, you may assume that it’s a hassle to calculate. Luckily, the opposite is true: The ROAS formula is incredibly simple. ROAS equals your total conversion value divided by your advertising costs.

“Conversion value” measures the amount of revenue your business earns from a given conversion. If it costs you $20 in ad spend to sell one unit of a $100 product, your ROAS is 5—for each dollar you spend on advertising, you earn $5 back.

10 Tactics to Help Improve Your PPC ROAS

Here’s how to either increase revenue or lower cost so you can boost the ROAS of your PPC campaigns:

1. Improve Mobile-Friendliness of Your Website

As more consumers are starting online searches on their smartphones, it’s imperative that your website is designed to be mobile-friendly. It doesn’t matter how enticing your PPC ads are if your website doesn’t deliver a mobile user experience that converts—you’d be paying for the clicks but not getting the conversion!

There are many ways to optimize a mobile shopping experience, such as improving load time, using location services to deliver personalized content, using design elements (e.g., accordion) to unclutter product pages, and streamlining checkout to reduce cart abandonment.

2. Refine Your Keyword Targeting

Your keyword targeting has to be specific in order to attract visitors who are looking for the exact product you’re advertising and who are ready to make a purchase. You can optimize each product page or landing page on your website with long-tail keywords to help attract high-quality traffic that’s more likely to convert.

Use PPC software or keyword discovery tools to identify highly specific and low competition keywords that are likely to be missed by your competitors, so you can get more clicks at a lower cost. In addition, you can rank for keywords that indicate high purchase intent. For local businesses, it could be “[ product/service ] in [ your city ]” and, for eCommerce websites, it could be “free shipping.”

3. Use Geo-Targeting

If you have a brick-and-mortar business, you don’t want to be paying for clicks from people who live 1,000 miles from your store. If you have an eCommerce website and only ship to certain countries, you’d only want to pay for clicks from visitors who live in places to which you ship your products.

To avoid paying for clicks from visitors who wouldn’t be able to buy from you due to their locations, target your ads to those who are initiating their searches from specific geographic areas or who include a specific location in their search terms. You can target your ads by country, region, city, or ZIP code, or by the radius around your store.

4. Spy on Your Competitors

There are many tools you can use to spy on your competitors’ PPC campaigns so you can see what’s working and what’s not. You can find out the keywords they’re ranking for, the offers they’re promoting, and the copy they’re using. Remember, driving traffic is only half the story. You also need to identify which ads are actually generating revenue.

To do so, analyze longer-term trends to find out which ads are not only getting the clicks but also performing well in terms of time onsite and bounce rates. In addition, you can infer that an ad is probably generating revenue if a competitor has been running it for a while.

5. Optimize Your Landing Pages

Remember that getting the click is only the first step? To turn traffic into sales, you need to optimize the user experience from the moment a visitor lands on your website to the time he or she completes a transaction. One of the biggest mistakes advertisers make is using the same landing page for all their ads, regardless of the different messaging or audiences.

Your landing pages should feature content that’s coherent with the ad copy. For example, if you’re promoting a 20% discount on an ad, the landing page should highlight the same offer. Don’t forget to A/B test landing pages so you can optimize the content and conversion rate.

In addition, make sure you have a process in place—e.g., remarketing campaigns or abandon cart triggered emails—to re-engage visitors who haven’t finished the transaction on their first visit.

6. Use Conversion Rate Optimization (CRO) Strategies

In order to increase revenue, you need to make sure visitors are converting into customers. Did you know that the global cart abandonment rate of eCommerce sites is 75.6%? That translates to a lot of visitors who put products in their carts but don’t complete the checkout process.

To make sure you capture as much of these potential lost revenues as possible, you need to optimize the path of conversion and reduce the cart abandonment rate of your eCommerce website.

7. Promote Seasonal Offers

The timeliness of your ads’ messaging, products, and offers can impact your conversion rate. Tailor your ad copy and offers to holidays, events, or anything happening in your niche—e.g., conferences—so it’s not only timely but also helps increase the chances that it will capture the attention of searchers who are looking for information or items related to the event.

In addition, make sure you’re positioning these products on your website in a way that’s relevant for the occasion, to deliver a seamless customer experience that will lead to conversion.

8. Use the Negative Keyword Feature

Besides increasing revenue from each ad, you can also lower ad cost to increase ROAS. When you pull a search queries report, you may notice that some keywords are getting clicks but not generating any conversion.

To increase your ROAS, you don’t want to be paying for these clicks. Add these keywords to your negative keyword list so searches for these keywords won’t trigger your ad, and you can avoid paying for clicks that don’t convert.

9. Use Product Listing Ads—PLAs

When you search for a specific product on Google, you often see a list of product photos and links at the top of the search results page. These product listing ads—PLAs—are shown when a searcher types in high-intent keywords.

A study found that revenue from PLAs has grown by 52% year over year. The increase is particularly impressive for mobile PLAs, which has increased sales by 164% and improved ROAS by 23%.

To improve the effectiveness of your PLA, make sure you have specific and relevant product descriptions on your website. Break your products into smaller groups for faster optimization and devise a bidding strategy that balances competitive levels, product margins, and conversion rates to define a max bid so you can ensure profitability.

10. Improve the Quality Score of Your Ads

A high Quality Score translates into a low CPC—cost per click—and a higher ad ranking. It’s also correlated with a lower cost per conversion. Your campaign’s relevancy is part of the formula that determines the Quality Score for your keywords.

One of the best ways to improve your ads’ relevancy is to structure them into small, well-organized, tightly knit groups of keywords. This will help improve the specificity of your keywords and how they match your website content so you can attract the exact visitors who are searching for your content or products.

How do You Optimize ROAS?

Follow these tips to optimize your ROAS.

Refine Your Keywords and Keep Refining

To target customers who are already looking to buy the product you offer, select narrow keywords. So instead of “dresses,” you may want to use “off-the-shoulder prom dresses.”
Use long-tail keywords to optimize all your product pages.
Use analytics tools to find high search, low competition keywords that your competition may be missing.
Consider keywords that indicate the customer is serious about buying. An example is “free shipping.”
Analyze your data to see what works for you and narrow your keywords accordingly.

Use Negative Keywords

Using negative keywords is a fast, easy way to lower your costs. Of course, you want to increase your ad revenues, but you also want to reduce costs. When buying PPC ads, pay attention to keywords that get clicks but rarely convert. You can add these to a negative keyword list, so people who search these words won’t see your ad. No sense in paying for clicks that are unlikely to convert.

Run a Brand Campaign

Bidding on your brand name is an almost sure-fire way to increase your ROAS. But wouldn’t someone who types your name into a search engine already know how to reach you? Here are a few facts:

Branded search campaigns typically get better ROAS than non-branded campaigns.
If you aren’t bidding on your name, your competitor probably is. So, when a customer types your name into search, your competitor’s name will come up. This brings up the obvious recommendation that while you’re bidding on your name, bid on your primary competitors’ names too.
Bidding on your name gives you control over what customers see. This is particularly important if you’ve had some recent negative press or reviews.

Use Artificial Intelligence (AI) Technology to Adjust Your Bids in Real-Time

You don’t have to wait until you have time to sit down and analyze your ads to adjust them. You could lose revenue in the meantime. Now there’s advanced technology that enables you to submit unique bids in real-time for every impression to maximize the value of your campaign.

Use a digital ad platform that automatically adjusts advertising bids on an ongoing basis to prioritize high-value targets and spend less money on low-value targets. Factors such as location, time of day, shopping behaviors, and more go into the calculation.

Promote Seasonal and Time-Sensitive Offers

Whatever the upcoming event, whether it’s Christmas, a conference, or an election, you can increase your return on ad spend and display advertising ROI by serving relevant ads when your customers are most interested.

Target By Location When Relevant

Be sure to only advertise to customers who can buy from you in their location. If you don’t ship somewhere, don’t pay for advertising that will reach people who live there. If you only have a brick and mortar store, only advertise to people close enough to likely shop at your store.

Tailor Your Landing Pages to Your Ads

Someone has clicked on your ad because they’re interested in flower-themed designer sheets. Great! But you may lose them if you send them to a general page on housewares. If you’re promoting your flower-themed designer sheets, send your customers to a landing page featuring those sheets.

If you’re promoting a sale, send them to a landing page with details about the sale. Don’t make your customers search for what they saw in your ad, because you’ll lose customers and get a low ROAS.

Optimize for Phones and Other Mobile Devices

Over half of global web traffic is from mobile devices, so if you aren’t optimizing your e-commerce site for mobile, you’re losing money. Your mobile site needs to be inviting, uncluttered, easy to navigate, and quick to load. Most importantly, make sure the shopping cart experience is flawless.

Catering to all your customers, not just those who access your site from a desktop or laptop, will increase your return on ad investment and display advertising ROI when you run campaigns.

Bid Strategically for Ads on Mobile, Tablet, and Desktop

You can set different bids for mobile, tablet, and desktop devices. If you’re using desktop as a default, you can bid a percentage for mobile devices, that is, a percentage more or less than you’re bidding for desktop. (The bid for mobile is usually lower.) The most effective way to bid for mobile devices is to use a digital ad platform that finds your audience across all devices.

Pay Attention to Conversion Rate Optimization (CRO)

As we’ve seen, clicks aren’t enough, and you need to be sure visitors are buying to increase your ROAS. You must convert those clicks into customers. Make it as easy as possible for customers to buy, because about 70% of online shoppers abandon their shopping carts. To reduce shopping cart abandonment:

Offer a deal before the customer clicks out.
Don’t sell a bad product.
Show your site is secure.
Use triggered offers.
Use live chat.
Analyze why your customers are abandoning their carts. What do they want?
Downsell your product. (For example, offer a shipping discount.)
Use retargeting.

Use Product Listing Ads (PLAs)

Don’t forget about product listing ads that appear at the top of Google results when you search for an item. They’re photos with a link to the product and the name or URL of the store. Clicks on PLAs have increased dramatically, particularly for mobile.

Improve Your Google Quality Scores to Improve Your ROAS

Google assigns a quality score to your ads, keywords, and landing pages. A high-quality score can reduce your ad prices and give you better ad positioning. It’s reported on a 1 to 10 scale and is based on factors that include ad relevance, landing page experience, and clickthrough rate. Your quality scores will increase as you increase the relevance of your ads and landing pages.

What is a Good e-commerce ROAS?

ROAS is commonly used in eCommerce businesses to evaluate the effectiveness of a marketing campaign.

It should be noted that having a high return on ad spend does not necessarily mean a company is profitable, as there are many other expenses that have to be deducted before determining a company’s net profit margin. This metric does, however, show the existing correlation between advertising efforts and revenues.

In addition to gauging how generally effective a company’s advertising is in terms of generating sales, ROAS can also be used to compare the cost-effectiveness of one marketing campaign against another.

For example, advertising campaign “A” may generate twice as large an increase in sales volume as the advertising campaign “B” does, but if campaign “B” costs only one-fifth the price of campaign “A”, then “B” is a more cost-efficient advertising expenditure.

Some advertising efforts can boost total sales without measurably improving profitability, while other efforts may show a significant rise in net profit margin even though sales only rise slightly. This might be due to the fact that campaign “B” primarily helped to increase sales of products with very high profit margins.

How Can I Increase my ROAS?

The most common problem with websites that don’t convert is that they describe products or services from the perspective of the business owners rather than the customers. If your content is not right, everything else done thereafter will not help your cause.

Your website content should be written in a way to address what your customers are looking for, their pain points and what the outcome of using your service or buying your product is. This might sound like a cliche but what most of your customers are buying is a solution to their problem and the feeling of relief that comes with it, rather than the product or service itself.

Another common problem that fits alongside vanity metrics is whereby those responsible for generating new business through the website resort to buying irrelevant traffic. While testing traffic is a common activity, continuing to pay for poor traffic just because it is cheap cannot be justified.

Here we hit a catch 22, in that if your website isn’t converting traffic how can you tell if the traffic is poor? The answer is you can’t know for sure without carrying out CRO on your website before testing traffic.

If you carry out CRO first and you get conversions from organic traffic and your traffic source is still not performing then in all likelihood the traffic is garbage.

Facebook ROAS Benchmark

CTR: 1-3% – clicks/landing page view campaigns

What’s a good click-through rate? We’ve found that anywhere between 1-3% is the CTR “green zone” and indicates effective creative and targeting.

Our data shows that If CTR is below 1%, it’s likely that ad creative is not a good fit for the individuals that are being targeted.

But, if CTR is at or above 3% – this is a great indicator that acquiring more leads and sales is in sight.

If an account sees a high CTR but low conversions, the user-friendliness of the website or pricing may need work, but we can conclude the ad creative is effective. However, if the CTR is low, then the creative may need to be updated.

CPC: $0.40-80 – clicks/landing page view campaigns

CPC is a complex metric influenced by a multitude of factors, including the targeted audience, advertising platform, the product being advertised, and the bidding strategy used.

However, for our accounts, we look for a CPC of $0.40-80 – we’ve found this to be a good benchmark due to the average performance across our accounts.

CPM: $3-7 – Top of Funnel / Reach

We aim for anywhere between $3-7 for CPM on top-of-funnel reach and awareness campaigns. The range may seem a little wide, but it’s important to consider different targeting parameters that will yield different CPMs.

Additionally, CPMs may be significantly higher in mid and bottom funnel campaigns, simply because these target a smaller audience. In those campaigns, we do not use CPM to measure performance.

What do CTR, CPC, and CPM benchmarks mean for an account?

If an account’s CTR, CPC, and CPM are all within the previously mentioned benchmarks, then it’s safe to assume that people are interested in the ad, and the budget is spending efficiently to lead users to the website.

LPV: $0.80-1.50 – clicks/landing page view campaigns

Landing Page Views, or LPVs, are higher consideration, which means that people are more likely to spend more time on the page rather than immediately navigate away from it. According to Facebook, landing page views are measured when a user clicks an ad, and the destination page successfully loads.

Because of this, LPVs are more expensive than CPC. In our campaigns, our LPVs cost between $0.80 and $1.50.

ROAS: 3-5x for purchase campaigns

Our goal ROAS at Blue Light Media is between 3-5x to ensure that we’re helping to turn a profit for our partners. We’ve broken down our average ROAS by industry for reference:

Natural Product CPGs: 3.2x

Beauty: 6.8x

Travel Accessories: 7.2X

Remember, the higher the more a product costs, the higher the ROAS might be if ads are performing well. Conversely, the lower the cost of the product, the lower the ROAS might be even if the ads are performing at the benchmarks measured.

With that said, ROAS within 3-5x usually means that the ads are well-targeted, well crafted, and overall successful.

What is a Good Social ROAS?

Depending on a company’s campaign objective, paid social ROAS could be greatly affected. On Facebook, objectives range from traffic campaigns to conversion campaigns. Typically, conversion campaigns work best for a ROAS-driven marketing initiative.

For a company that is selling video courses without any marginal costs, they may shoot for a ROAS over 1 or 2 since this ROAS is profitable for them. On the other hand, a retail store that sells shoes with 50% of the revenue in a sale may need to shoot for a higher ROAS like 3 or 4 since the company has additional costs to consider.

Let’s compare a sports team to an e-commerce company. A sports team’s main objective is to maximize ticket sales while a t-shirt e-commerce company is focused on selling as many t-shirts as possible. For the sports team, a ticket costs $80 while for the t-shirt company, t-shirts are $15 each. It is much easier for the consumer to make a $15 purchase than an $80 purchase.

In this scenario, ROAS may be affected since the cost of the product is much different from the other. For the sports team, there are more considerations at play. For example, the consumer would have to figure out where the seats are located, check their schedule to see which game would work best, and invite friends or family to attend the event.

On the other hand, a t-shirt is a pretty straightforward purchase that does not require as much commitment as a sporting event. The consumer considers the size and style of the t-shirt, but the purchase can be easily made.

There are also different objectives for companies in unrelated industries. Let’s take a look at an e-commerce company versus a professional sports team. An e-commerce company that sells t-shirts will be very focused on increasing purchases while a sports team will be focused on increasing ticket sales and brand awareness.

If ROAS is less than one, then the ad is losing money. So, what if ROAS is greater than one? ROAS operating above one is profitable and thus can be considered successful. ROAS of 3:1 or $3 revenue to $1 ad spend is a good baseline but is not considered a highly exciting number. 4:1 ROAS or $4 revenue to $1 ad spend is a very common goal in which campaigns are getting exciting and profitable. 5:1 ROAS or $5 revenue to $1 ad spend and greater are considered a big win.

Ultimately, a higher paid social ROAS means more revenue is being driven from the campaign. When performance is good, ad spend can be turned up to lean into the performance. Increased ad spend can then lead to a boost in ROAS. If performance is suffering, budgets are typically lowered or campaigns are turned off.

How do I Increase my Amazon ROAS?

one thing to keep in mind throughout is that a lower ROAS isn’t always what you want. If you are launching a new product or looking to expand market dominance, spending more might be the thing to do. Make sure to align your PPC goals with your overall business objectives.

With that out of the way, let’s get started.

1. Use exact match bids

If you want to reduce wasted ad spend, you need to focus on driving traffic that actually converts. This can be done through exact match bidding, which is a subset of search term optimization for Amazon. Let’s take a closer look at the different bidding options for Amazon ads.

Broad match bidding lets you set a seed phrase for your PPC ads, but puts you in auction for any number of related words or phrases, leading to a much larger audience. This is great for finding new keywords. But it leaves you at risk of paying for impressions that are entirely unrelated to your products.
Phrase match bidding is similar to broad match, but word order is taken into account. This allows you to still retain a broader set of keywords but restrict some of the erroneous listings.
Negative keywords are phrases that you can activity remove from your listing possibilities, and are helpful for further honing broad match and phrase match campaigns.

Exact match bidding allows you to bid on only the specific words or phrases you choose. Once you have insights into which search terms lead to the highest conversion rate, you can shift your ad spending directly towards them using exact match bidding.

Moreover, bidding on an exact match is often cheaper than bidding on phrases or broad matches that are priced as ad groups. That means exact bidding can increase conversions and reduce spending at the same time.

While exact match bidding can improve your ROAS for Amazon, you need to understand your target audience through data to get the best results. Here’s a more detailed guide on using analytics to streamline your search term optimization strategy and find the right keywords and phrases.

2. Increase your AOV

If you can increase your average order value (AOV), you will see an inherent improvement in ROAS for your Amazon ads. This doesn’t mean price gouging is a good idea. In fact, that would massively reduce your buy-box wins. In the current climate, it also might get you banned from Amazon. You are going to need to get more creative.

Your number one strategy for increasing AOV is to bundle your products. Although not technically a ‘bundle’ by Amazon standards, this might mean creating multi-packs of single, low cost products. However, a more sophisticated strategy is to match different products together in complementary packages — what Amazon officially calls a bundle.

A well-crafted bundle can appear more valuable than the sum of its parts, allowing you to even further increase AOV. But you do need to make sure that you match products appropriately and abide by Amazon’s bundling policies.

The customer data you have will be critical to figuring out which products match well together. Advanced analytics tools that help you determine customer lifetime value and ‘buying trajectories’ are a great asset to building the best bundles.

Fundamentally, however, bundles provide higher value listings to advertise. If used appropriately and sparingly, bundles can form an important part of a ROAS improvement strategy — just don’t get carried away.

3. Take advantage of promotions

Similar to offering bundles, promotions are another way to convince consumers that they’re getting a great deal on your products. That means promotions can improve your conversation rates, and in turn, reduce your advertising cost of sales (ACoS).

There are three main promotion options that can help you get the most out of your Amazon ads spending:

Social Media Promo Code: These are special links that bring customers to a landing page with qualifying discounts. That means you can use this promotion in conjunction with PPC ads across a wide range of social media platforms to bring in new customers. Similarly, you can generate coupons to distribute across various channels as well.
Percentage Off: A short-term discount or percentage off promotion can create a sense of urgency for consumers that fuels sales. Similar to this is the Amazon Lightning Deals option, which offers greater visibility for your products on the Amazon Deals page for a limited time. There are also vouchers that Sellers can create, which are a great promotional feature on Amazon.
Free Products: Amazon includes options for ‘Give Away’ or ‘Buy One Get One Free’ promotions that can have a similar impact as bundles. They can generate a buzz around your brand and make consumers feel like they’re getting a great deal.

4. Focus on less competitive search terms

While broad search terms (for example, shirts, shoes, bookshelf) are an excellent way to build awareness and reach a larger audience, they’re also the most competitive. High-volume search terms generally have a higher cost per click (CPC) and lower click-through rates (CTRs) than low-volume terms.

Your competition also wants to rank for those broad terms, but people searching those terms are less sure of what they want to buy. Many high-volume search terms will have traffic that’s irrelevant to your brand, and could waste your ad budget at a higher bid price.

For example, the term ‘shoes’ will provide any number of results, ranging from ‘dress shoes’ to ‘running shoes’. If you sell brown, suede, brogues for women, ranking for a more specific term will get you in front of a more relevant audience for less money.

This strategy comes back to the first point — use exact match bidding. However, within that context, you should prioritize the terms that are the least competitive.

5. Keep focused on your goals and match them to ad types

No matter the Amazon ads strategy you choose, it has to align closely with your business’s goals. Improving the ROAS of a specific campaign is great, but if you don’t start thinking longer-term, your sales could stagnate. That means search term optimization, bundles, promotions and other strategies should be largely determined by your business goals.

In addition, you should make sure you’re using the right type of ads to reach your goals. Sponsored brand ads, for example, are more targeted at top of funnel searches, whereas sponsored product ads are better for converting. Many brands will want to balance their ads across the entire sales funnel when implementing their PPC campaigns.

With analytics tools that leverage AI and machine learning, you can shift to a long-term strategy based on customer profiles and buying trajectories. That means leveraging customer and behavioral data to understand who clicked on your ad and why even getting you closer to benchmarking customer lifetime value (CLV). This will help you improve your overall ROAS, instead of fighting to increase the ROAS of each advertising campaign along the way.

What is a Good ROAS on Amazon Ads?

What is a Profitable ROAS?

A ‘good’ RoAS depends on your industry or business model that can be different from the overall average. RoAS is largely influenced by operating expenses, overall business/account health, profit margins, and many others. Perhaps, we consider 4:1 as a benchmark RoAS.

i.e. for every $4 revenue, $1 ad spend is RoAS benchmark.

As we said, this benchmark can change from industry to industry. While few companies having 10:1 as benchmark RoAS can manage to stay profitable, other businesses need 3:1 RoAS to stay profitable.

Smaller profit margins indicate that businesses must maintain low advertising costs.

On the other hand, businesses having large profit margins can survive low RoAS.

What is ACOS?

Advertising Cost of Sales (ACoS) is a term used by Amazon for their sponsored ads. ACoS is not common PPC jargon, so don’t be surprised if you haven’t heard of it.

The easiest way to think about ACoS is this. Once you have your products profit margin as a percentage. You would then deduct the ACoS percentage to get your final margin.

E.g. Goods retail for $30, profit margin is 40% ($12), and ACoS is 10% ($3). You’d then take home $9 as profit on sales from your ads.

PPC ROAS

Return on ad spend (ROAS) is one of the easiest revenue-based metrics to measure. It is simply the total revenue generated for a specific marketing channel (like PPC) divided by the total spend on that channel.

Here’s the formula: (Revenue/Spend) = Return on Ad Spend

Pretty simple, but here’s an example for further clarification:

If I spent $10,000 on paid search in October and generated $40,000 in revenue, my ROAS for paid search is $4:1. ($40,000/$10,000= $4)

It tells you if, at the most foundational level, a marketing channel is performing at a level that will allow for profitability.

Unlike many PPC metrics, the higher your number the better. That’s because the metric tells you how much revenue you generate off each advertising dollar spent. So a $4:1 means that for every $1, you generate $4 in revenue. A $6:1 means that you generate $6 for every dollar you spend.

What is a Good ROAS Number?

An acceptable ROAS is influenced by profit margins, operating expenses, and the overall health of the business. While there’s no “right” answer, a common ROAS benchmark is a 4:1 ratio — $4 revenue to $1 in ad spend. Cash-strapped start-ups may require higher margins, while online stores committed to growth can afford higher advertising costs.

Some businesses require a ROAS of 10:1 in order to stay profitable, and others can grow substantially at just 3:1. A business can only gauge its ROAS goal when it has a defined budget and firm handle on its profit margins.

A large margin means that the business can survive a low ROAS; smaller margins are an indication the business must maintain low advertising costs. An e-commerce store in this situation must achieve a relatively high ROAS to reach profitability.

What ROAS Should You Aim For?

Unfortunately, there’s no one formula that you can use to figure out the ROAS that will maximize your profits.

Some online guides will tell you that you should strive to hit a 400% ROAS; that said, this doesn’t make much sense, because each company’s ideal ROAS differs based on their industry, the products they’re selling, and even their competitors. Bearing this in mind, you’ll have to do some testing in order to arrive at a ROAS that maximizes your profits.

Here’s an example. Say your break-even ROAS is 200%, and you’re currently aiming to hit 400% ROAS for a start. After running your campaigns for a couple of months, you hit this target comfortably. Here, calculate the actual profitability of your campaign (Revenue – Ad Spend – Cost of Goods Sold), then strive to hit a different ROAS. You can either aim for a higher ROAS (500%) or a lower ROAS (300%). Whether you decide to aim higher or lower depends on a few things, namely your Impression Share and break-even ROAS.

If you’re not sure what your impression share is, this is basically the number of impressions you’ve received divided by the estimated number of impressions you were eligible to receive. It’s your share of voice, essentially.

If your impression share is very low, then you might want to try higher CPC bids. In order to allow your CPC bids to go up, you will need to allow your ROAS to come down. Hence, if your impression share is low, then you may want to experiment with a lower ROAS target.

Impression share aside, another factor that will impact your decision (to try for a higher or lower ROAS) is your current ROAS versus your break-even ROAS.

For instance, if your current ROAS is only 50% above your break-even ROAS, then it isn’t feasible to push down your ROAS goal by 100%. On the other end of the spectrum, if your current ROAS is 10x your break-even ROAS, then this gives you a lot more wiggle room. All other things being equal, you’ll be able to play around with a lower target ROAS, without worrying about not turning a profit.

Metrics For Google Ads

If you’re a business looking to grow, these are your most important metrics. They’re the numbers the C Suite wants to see when you say, “We’re running an ad campaign.” We’re talking returns, ROI, and the bottom line.

Every ad campaign’s goal isn’t to see direct revenue, and not every campaign is targeting bottom-of-funnel keywords. But hopefully, you can assign value to different top-of-funnel actions to gauge performance.

1. Clickthrough Rate (CTR)

Clickthrough Rate tells you how many people have seen your ad and clicked. It’s an important metric to keep an eye on, but as usual, isn’t so straightforward. You want a high CTR, but when it comes to Google Ads, you only pay for clicks. So if you use language in your ads that weeds out unqualified clicks, you may see a lower CTR. Let’s look at an example:

Company A runs a campaign seeking to increase shoe sales with direct, straightforward ads. They target “blue shoes with green laces” keywords and have a page optimized for blue shoes with green laces.
Company B runs a campaign seeking to infiltrate a market with a new product. They target “beef jerky” keywords, but are selling a beef jerky alternative: bacon jerky.

Company A is running a predictable campaign whereas the other is trying to infiltrate a new market and put their ad in front of someone who may not have been necessarily looking for it. So it’s okay if CTR isn’t sky-high. However, if an ad’s CTR gets too low, its quality score could be affected, so you do want to keep eyes on this and make sure your ads are still relevant to the targeted keywords.

2. Quality Score

Quality score is an estimate of the quality of your keywords. It runs on a 1-10 scale and is calculated based on ad relevance, CTR, and landing page experience. Quality score can affect where your ad ranks and when / if it shows at all.

You can find an ad’s quality score by adding it as a column within your Google Ads dashboard.

You should always be checking in on quality scores, reworking ad copy, and ensuring a pleasant landing page experience for users.

3. Conversion marketing

Conversion marketing encompasses the art and science of marketing with the aim of maximizing the percentage of visitors taking a desired action on your digital properties. A conversion marketing strategy includes tactics to make the most of the existing traffic on a website by optimizing its key elements to uplift conversions.

As a marketer, you might be juggling multiple hats. In one of your workdays, you might be hustling to build more backlinks for your pages, in others you might be working with your design team for a shinier prototype for some of your web pages.

And in between, you are assigned urgent copywriting tasks for your paid search campaigns. In between all this, should you even focus on conversion optimization? It’s a relevant question and begs an evidence-based answer.

Back in 2009 when Google couldn’t decide which shade of blue would generate the maximum clicks on their search results page; Marissa Mayer, then Vice President, Search Products & User Experience at Google, got her team to test 41 gradations between the two contenders to find out which one would receive the most clicks.

Experts argued that testing something as trivial as the color could digress the UX teams from addressing more advanced, impactful changes.

However, for the world’s most popular search engine where a slight drop in conversion rate could translate to millions of lost dollars, experimenting every little change that impacts conversions (clicks, in this case) seems justified, doesn’t it?

The power of conversion marketing lies in its ability to leverage a traffic base of millions to drive a significant uplift in revenue with a marginal (say 0.5%) uplift in conversions brought about by a minuscule tweak.

4. Impression

Impression share tells you how often your ads are showing compared to how often they could have been shown. If your ad isn’t showing, it’s due to rank (Google is prioritizing ads it thinks searchers will be more likely to click) or budget (yours is limited). You want your ad to show in every possible situation.

Impression share is really helpful to know, but what might be even more helpful is to know why an ad didn’t show. If due to rank, you need to address that ASAP. If due to budget, this means there’s opportunity.

You can find Impression Share, Lost Impression Share Due to Budget, and Lost Impression Share Due to Rank by adding them to columns for view within the Google Ads dashboard.

5. Cost per Action

Cost per action is a digital advertising payment model that allows charging an advertiser only for a specified action taken by a prospective customer. All actions covered by the model are directly related to some type of conversion, ranging from a newsletter sign up to a link click or sale, and determined by the advertiser.

Final Thoughts

Improving your ROAS isn’t a one-and-done activity. It takes ongoing testing and optimizing at every stage of the advertising funnel.

By creating precisely targeted ad campaigns and providing personalized post-click experiences, you can make significant improvements to your ROAS.