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What Is A Good ROAS? How To Calculate It?
Last Updated on: November 7th, 2024
Spending on advertising to promote your business is a very important task that a business needs to undertake. Without advertising, people around the world will have a hard time knowing about your products and even buying them. Therefore, you can say that advertising and promotion are core concepts of marketing.
However, if you have a business, then you would want to know how effective your ads are. You won?t be able to judge the efficacy of your ads if you don’t know how much sales they made. Therefore, ROAS is here to help you out.
If you want to know what is a good ROAS, read this guide below.
What Is ROAS?
ROAS stands for Returns On Ad Spend. It refers to the revenue generated through sales directly from ads compared to the amount spent on your ad campaign. Therefore, it is the result you get for spending money on advertising. If you spend a lot and don’t even break (have a ROAS score <1), then reevaluate your ad campaign. You must be doing something wrong.
What Is The Difference Between ROAS And ROI?
ROAS and ROI (Returns On Investment) are two very different terms. ROI deals with the returns you get for spending only on ads. On the other hand, ROI calculates what you earned from your overall costs (including advertising, production, employee salaries, etc).
Therefore, you can say that ROAS is just a part of ROI, which encapsulates much more than just advertising costs.
How To Calculate ROAS?
If you wish to find out what is a good ROAS, then you must learn how to calculate ROAS. Contrary to what people say, it?s pretty easy to calculate target ROAS in Google Ads.
In simple terms, you can calculate it using this formula:
ROAS = Ad Revenue / Ad Costs
Here, revenue refers to the amount of money earned because of users clicking on the ads and buying your products. The cost refers to the amount of money spent on generating these ads.
For example, let’s say you earned $4000 dollars from buyers who clicked on your ads. In addition, you spent $1000 on these ads. Therefore, your ROAS will be:
ROAS = $4000 / $1000 = 4
What Is Good ROAS?
Getting higher returns than your expenses is one of the key metrics to estimate the performance of your business. The ratio of returns to expenses should be higher so that your business earns revenues and makes profits.
Therefore, most businesses have this question in mind – what is a good ROAS? The answer is not very simple because different industries have different expectations. This is why, as a rule of thumb, a ROAS of 2 is the minimum you need to hit to make your ad campaign a success. Typically, the higher ROAS you have procured, the better it is for your business.
How To Increase ROAS For Your Business?
Now that you know what is a good ROAS , you should be thinking about how to increase your ROAS. Well, here are some great tips to get the highest ROAS for your business from any industry.
1. Launch A Well-Planned PPC Campaign
A well-planned PPC campaign can make your ROAS count significantly go up. This is true if you are using branded PPC campaigns. It will be highly beneficial for your business if you start using your brand name in your ad campaign as a keyword. Statistically, it has been proven that branded ad campaigns have yielded a higher ROAS compared to non-branded campaigns.
2. Make Use Of Negative Keywords
Placing the right keywords in your ad campaign can create the turning point for your campaign to be successful. This is why well-researched ad campaigns are preferred by brands all over the world.
However, if you want to know what is a good ROAS by seeing results yourself, then start using negative keywords. Negative keywords are specific keywords that people who are not interested in your business will use to search for you. However, they broadly match the industry your business is from.
For example, you might have a business that provides various marketing software. Therefore, using the keywords ?marketing software? in your ad campaign will be a great start. However, you can also use other keywords like ?marketing software jobs? even if you are not recruiting. These keywords are related to your business but have got nothing to do with the advertisement by itself.
3. Optimize Your Landing Pages
Your landing page can be thought of as the face of your website. It is a very important web page for your website because it?s the first page users will see after clicking on your ad. Therefore, it’s best to make that page a standout.
To do so, you need to optimize the page in the best ways possible. Therefore, the first step you should take is to make the page visually pleasing and attractive. Use great color combinations and attractive images as well. Secondly, you need to make the page very fast and responsive. You will not want to make users wait a min for the page to open up.
Frequently Asked Questions (FAQs):
Some of the most commonly asked questions regarding what is a good ROAS on the internet are:
Typically, a good ROAS value will be around 3000 to 4000. This would mean a 3:1 or 4:1 return on money spent on advertising. However, this is the basic ?good? percentage. Most big businesses have ROAS around the 6000 mark.
If you ask what is a good ROAS for Facebook Ads, then the minimum ratio is around 4:1. However, this is just the base returns to make any profits at all. A recent survey has indicated that the top 30% of marketers on Facebook make around 8 to 10 ROAS.
If you want to know what is a good ROAS on Amazon, then it is between 5 and 6. Many businesses aim for higher ROAS and achieve them too.
If you ask what is a good ROAS for Google Ads, then the minimum ratio is 2:1. However, most businesses will aim for a higher ROAS than 2. Many small businesses have had successful ROAS of 8:1.
Conclusion
If you have read so far, you now know what is a good ROAS. ROAS represents the returns you have achieved for spending on ads. Typically, a ROAS score above 2 is food enough. However, the higher it is, the better it is.
To achieve a high ROAS, make sure your ad campaign is optimized well. This means making use of a well planned PPC campaign that uses negative keywords and your brand name as well. In addition, it’s best if you can optimize your landing page as well.
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