Return On Ad Spend (ROAS) is one of the most important metrics you can ever focus on when running eCommerce campaigns. It is used to evaluate the effectiveness and profitability of your advertising campaigns.
Note: The profitability of advertising campaigns determined by ROAS does not in any way influence the overall performance of your eCommerce store.
Calculating ROAS and its importance in your advertising campaigns
ROAS is calculated by dividing the revenue got from advertising by the cost of running your advertisements. It helps answer one of the most fundamental questions in digital marketing today – how much did I get back from investing a specific amount of money in my advertising campaign?
By focusing on the revenue return from a specific campaign, you get to be in a better position to know the value gained from your investment. In addition, since ROAS is expressed as a ratio, you get to easily understand how much each dollar invested in the ads yielded. In turn, you can easily gauge if your campaigns were worth it and the best-performing ones over a similar period.
What is the threshold for a good ROAS?
When calculating ROAS, it is only right to be concerned about what to consider a good ratio. If you are a new eCommerce store, it is easy to become overenthusiastic on the results to achieve. Depending on your industry, the standard ROAS ranges between two times to four times the amount invested in advertising campaigns. This means that a ratio of between 2:1 and 4:1 is the benchmark for a good-performing PPC campaign in terms of its ROAS.
However, you do not have to be limited to the average standards when you could run higher-value PPC campaigns. Taking a similar path to Minimo that opted for Okiano’s automated Google ads is a guaranteed pathway to beating the industry standards. The PPC management platform easily creates effective ad campaigns using machine learning and AI, which help win against the odds. In Minimo’s campaigns with Okiano, the company achieved 1,111% in ROAS while driving down its cost per purchase to $3.11.
How automated Google Ads leads to higher ROAS
Automating your PPC campaigns is a channel to attaining higher ROAS rates as it enables you to eliminate the hurdles that negatively impact your ads. It is only by appealing to your target audience with the right ads that you can achieve higher scores. Opting for AI-enabled Google ads minimize these risks through:
Running advertisements with a high Google quality score
This helps you lower your cost per click, which translates to lower cost per conversion and leads to higher ROAS.
Running campaigns that factor in the user journey
You need to offer your target audience a solution to their pain points through your ads. Automated ads are hinged on relevancy, and this is a winning factor for your PPC campaigns.
Running ads that are in line with top-ranking competitors
AI and deep machine learning give you the pleasures of running ads that are in touch with the latest trends in your industry. Consequently, this eases the process you go through to attract more traffic, driving up your ROAS.