Even if you adopt an SEO strategy, you know that advertising gives a boost to your visibility. But do you know if your ad campaigns are profitable for your business? ROAS is the indicator you should use to assess the return on your Google Ads campaigns. Find out what ROAS is and how you can use it to grow your business beyond your SEA! Optimising your ROAS offers many opportunities to improve your processes and therefore your revenues. You just need to know how to identify them to use their potential. From the definition to the advantages of calculating your ROAS, discover in this article all the avenues that the monitoring of your advertising campaigns allows you to take!
What is ROAS in marketing?
ROAS is an indicator that evaluates the return on your advertising investments. Its initials stand for Return On Ad-Spent. With this tool, it is possible to evaluate the performance of your marketing campaigns very precisely, by isolating the advertising sector from other investments. It is calculated precisely by the difference between your turnover and your advertising expenditure.
What is the main difference between ROAS and ROI?
Unlike ROI, ROAS only takes into account investments in advertising, direct promotion. ROI orReturn On Investment represents the benefits of all other investments, excluding advertising costs. It is more global.
Here is an example to differentiate between ROI and ROAS. To calculate the ROI of your social networking strategy over a year, you will have to take into account the human and material resources used (work of the community manager, purchase of a microphone to optimise the sound of your videos, etc.). If you want to know how much you have earned from buying Facebook Ads or Google Ads, you should use the ROAS and only include the advertising expenses.
Optimising your ROAS: what is the ideal ratio?
There is no ideal ROAS reference. Indeed, your advertising campaigns will inevitably be different, since they will serve different objectives (winning over a new target, maximising conversion, building audienceloyalty, etc.).
What is an acceptable ROAS? A campaign is considered to be "successful" if the ratio is €4 of revenue for every €1 of advertising expenditure.
However, if you see a Google or Facebook campaign that is performing worse than this report, don't panic. The ROAS calculation is strictly monetary and does not take into account the visibility gained despite a low click rate or the customer acquisition strategy, which is necessarily more expensive than a loyalty campaign.
It is therefore essential to consider ROAS as a branch of your overall digital marketing strategy. Optimising ROAS is not an end in itself: ROI and ROAS are inseparable in order to develop your overall business.
The overall health of the company, profit margins, click-through rates and operating expenses have a direct impact on the performance of your advertising expenditure. These are all criteria to be monitored in order to control your advertising expenditure and the development of your business.
Why should you monitor and optimise your ROAS?
Like all business indicators, monitoring ROAS allows you to evaluate the performance of your marketing campaigns in relation to the resources injected into this strategy. It allows two major advantages to be exploited for your business. What are they?
More accurate tracking and easy improvement of advertising campaigns
Among all the KPIs to follow to calculate the profitability of your online business, wanting to optimise your ROAS is an excellent way to take stock of your advertising campaigns. For those that worked well and gave you a high ROAS, you will need to know why and draw inspiration from the strong points to reproduce them. For disappointing campaigns , you should also analyse the cause of this failure in order to bounce back better.
You will then get trends of what works and what doesn't for your business. These are perfect opportunities to anticipate the cost of customer acquisition or to refine your keywords for Facebook and Google Ads. This predictive ability gives you the opportunity to adjust your ad spend and optimise your audience conversion.
Discovering opportunities and mistakes through ROAS
The ROAS calculation is an excellent tool for comparing two Google campaigns and doing A/B testing. It will then be easier to determine which one was more effective and why.
On the other hand, by reasoning your Google Ads and Facebook Ads, you will have a more complete overview of your winning products and bestsellers and can weed out those that are less profitable from your catalogue. By analysing your ad spend, you can also identify a new target or seek to maximise conversions by redirecting your ad strategy.
You now know what ROAS is for in your business. But how can you optimise your ROAS by acting on the different KPIs? This is what we will look at in the rest of this article.
Optimising your ROAS: how to proceed?
As you can see, in order to improve your ROAS, you will need to reduce your advertising expenditure, or at least devote it to the most profitable areas. On the other hand, you will logically need to increase your revenues. Here are a few ways to optimise your ROAS.
Off-site strategy to improve ROAS: 2 ideas to reduce your advertising expenses
Let's look at the optimization criteria that only concern the advertising strategy, independent of the actions related to your site. How can you reduce your advertising expenses while remaining effective and present in Google Shopping ads?
Improve targeting and therefore CPM
Are your ads not playing well? It could be that your ads are poorly targeted. Make sure you are reaching the right audience. If not, if few people interact with your Google Ads or Facebook Ads, algorithms such as Google's Smart Shopping will deem these ads irrelevant to your target audience and reduce impressions with your potential audience. You will then have to inject more funds to run your ad.
If your ad campaign gets a lot of views and only reaches qualified prospects, Google, Facebook and other advertising media will increase its distribution. You will then drastically reduce your CPM(cost per thousand), which means that you will reach more people (qualified, likely to place an order) for less money. Improving your targeting means addressing the right audience, being favoured by the algorithms and thus optimising your advertising budget.
Increase CTRs on ads
If you notice that the impressions are good but the conversion rate is very low, it is probably a sign that your ads are not making your future customer want to visit your site. In addition to having a very low ClickThrough Rate (CTR), you will significantly increase the Cost Per Click (CPC).
In other words, to maximise conversion, you will need to spend more to appear in Google ads. How can you increase the conversion rate of your ads on Facebook or Google? Gain your target audience's interest by improving the impact of your ads:
- Make your ads irresistible by calling on a copywriting rockstar. Seducing with keywords, arousing emotions, speaking directly to your future customer, this is the role of an effective text on Google Ads. To optimise your ROAS, look for a copywriter who will boost your conversion rate (both in your ads and your newsletters) and thus lower your CPC. Consider varying your Facebook Ads to test different configurations.
- Don't skimp on the creative side either: a picture speaks a thousand words, and this is even truer in digital marketing. Your graphics team should be able to adhere to your brand while varying styles to compare each Google campaign. Of course, Google Analytics won't tell you if the images you choose are good, but you can draw your own conclusions by analysing conversion rates.
On-site strategy to optimise ROAS
The production, scheduling and analysis of ads is only part of the equation. If you see very good CPMs, CPCs and CTRs in your KPIs but your revenues are stagnant, it is probably due to a flaw in your website. To increase your revenue, keep up with the decline in ad spend and thus optimise your ROAS, take advantage of the following opportunities:
Thinking about your marketing in 360° terms
Take stock of all aspects of your digital marketing. Examine the return on investment(ROI) of your catalogue, discover your ideal customer, audit your visual and written communication.
The objective is to readjust your marketing to target them correctly without spending more money or energy. The buyer persona exercise should become your priority to redefine the codes of your marketing, because all your actions should speak to your ideal customer: inbound marketing is more effective and cheaper than an untargeted advertising campaign.
Promote conversion rates on your site
Let's go back to the point we made earlier. Your advertisements must be made irresistible by the work of an experienced copywriter and an effective graphic designer. However, your site must be able to meet the same quality standards. Copywrite your texts, talk about benefits rather than descriptive features, place them in the right place.
Think of illustrating your texts with photos or videos that show your products in situation and avoid photos from image banks. Stand out from the crowd by reworking your graphic charter, without forgetting to take care of the web design of your site. A customer who gets annoyed because his navigation is complicated will never come back and will convert even less. Study your target audience to find out how they perceive a user-friendly site.
Enriching its offer
Never rest on your laurels, even with your catalogue! Regularly question your offers and don't hesitate to test different configurations to find the most effective over a given period. Obviously, your offer must be immediately visible on your site to become the engine of your turnover and save you a laborious conversion. In this way, you will stabilise your ROAS.
Capture leads to optimise ROAS in the medium to long term
The cost of acquiring a new customer is high enough to not let them go without leaving an address. Absolutely convert your traffic! If a prospect doesn't buy today, the conditions may be right tomorrow for him to take action. And in this case, you will have to solicit him regularly so that you remain in his memory.
It is much less expensive to relaunch a target by email than to go and get them through offers on Google Shopping or via a Facebook Ads campaign. Optimising your ROAS also means ensuring that you capture leads and then maximise your LTV(LifeTime Value) through well thought-out offers that are adapted to your evolving needs.
Know your buyer persona by heart
Defining your ideal customer is the cornerstone of your business. Optimising your ROAS means limiting your advertising expenses while increasing your revenues. To do this, you need to target the right audience at the right time with impactful ads.
The challenge will be to know your buyer persona by heart. By hitting the bull's eye with every campaign, you will exponentially increase your revenue and won't need to increase your Google Ads budget to win over a new target. By building your buyer persona, you'll be able to offer them the right ads, content, products and experience. You will know exactly what tone to adopt in your advertising campaign, what images will speak to your customer and what type of offer they will be most receptive to.
Conclusion:
ROAS is a more specific indicator than ROI and allows you to evaluate the profitability of your advertising expenses. The ideal ratio does not exist, since a customer acquisition campaign can lower your ROAS. Also, if this indicator is very low, it does not measure the real effectiveness of your advertising.
It is necessary to keep an eye on your ROAS. It allows you to better think about your advertising budgets, and to improve certain aspects of your Facebook Ads or Google Ads to make them even more effective.
Taking an interest in the profitability of your advertising also has the advantage of uncovering marketing opportunities and mistakes. For example, a poor ROAS can lead you to rethink your buyer persona and reorganise your digital marketing. Fine-tune your targeting, increase conversions, sort out your catalogue, capture leads, ROAS is an unsuspected improvement tool for your business.
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