Measure the actual return on your advertising investments by calculating ROAS

[mdabuhasan]

Did you finally hire an advertising agency months ago but still don't know if you're getting your money's worth?

In the world of marketing there is a method that can help you: it is called ROAS.

The acronym ROAS (Return On Advertising Spend) refers to the calculation of accurate mobile phone number list the return on advertising expenditure.

Simply put, ROAS measures the revenue a company makes for every dollar spent on advertising .

The ROAS formula is Return / Total Ad Spend * 100.

Practical example: 3 months ago you launched an AdWords campaign to increase sales of your product/service.

The operation cost you: €5000 in clicks + €3000 to pay the advertising agency that follows you.

So, in the last 3 months you have spent €8,000 on advertising.

In the meantime, you have earned €40,000 from selling your product/service.

Applying the formula to the example 40,000 / 8,000 * 100, your ROAS is €5 for every euro spent, so 5%.

Good, right?

It means you and your agency are working well!

Another example: Luisa and her e-commerce site for the online sale of handcrafted wooden toys.

To promote her site and get more traffic, Luisa decides to run AdWords (Google Ads) campaigns, thanks to which she quickly gets traffic.

Her campaigns now total €10,000 in revenue each month, and Google Ads costs her around €2,500 per month.

Applying the formula to Luisa's case:

10,000 / 2,500 = 4%

That is, for every euro spent on her campaign, Luisa earned approximately €4.

Not bad!

The general rule for ROAS
There is a general rule that allows you to understand if your ROAS is positive or not.

When it's less than 3 your marketing strategy isn't going right and you're probably losing money.
With a ROAS around 4 your marketing is paying off .
If your ROAS is 5 or higher your money is well spent on advertising .
Basically, if your campaign (on Google, Facebook, Instagram, etc.) generates at least €3 for every euro you invest, you're doing well.

Remember: The correct minimum threshold for profitability varies from company to company, but this rule is a good starting point.

ROI and ROAS, what are the differences?
At first glance, the language of online marketing may seem like a tangled mess of acronyms and difficult names.

In reality, these are simple concepts, as in the case of the difference between ROI and ROAS , two indicators that advertisers tend to confuse because they significantly influence each other.