Return On Ad Spend (RoAS) is a metric used to determine if an ad campaign is effective and profitable. With a simple formula of RoAS = (Revenue – Total Ad Spend)/Total Ad Spend, businesses will have a clearer picture of their ad campaign’s performance.
The question now is, what do you do with this information? How do you improve your campaign’s RoAS? You can always ask professional e-commerce business advisors for help, but it’s always good to know more about the intricacies of running a business on the Internet today.
Here are some tips you can use to improve RoAS.
Assess Your Ad Channels
The process of improving your RoAS begins in assessing your business, your target audience, and the platform where you’re running the campaign. To put it simply, know where your audience is and where you are running your ad.
In this sense, if your target market is in LinkedIn, spending on Instagram ads will not do your RoAS any favours. Switching from Instagram to LinkedIn, for this scenario, ensures that your RoAS will improve.
Test Additional Ad Channels
If you find RoAS success in one ad channel, it doesn’t mean that that’s the only channel you’ll run ad campaigns on. Most businesses will have multiple ad campaigns running on different platforms to reach their target audience.
Let’s say that you found success with your Google Ads campaign; try running an ad campaign on Facebook Ads for a limited time and see what happens. If the RoAS seems favourable and profitable enough, then try running it for a second time. When the results are good, it may mean that you found a new ad channel.
Target Your Ads
Ad targeting is quite similar to filtering search results of a web search. Ad targeting lets you choose to whose screens your ads will appear, making your ad spend more worthwhile.
Ads can usually be targeted by location, demographics, keywords, and more. Imagine that your business operates and offers its services in Perth. It wouldn’t make sense to spend on ads running in Sydney, would it? To improve RoAS and optimise ad spending, you can refine your ad campaign to only appear for people in Perth.
But you have to be careful with targeting. Set the target too broadly, and you risk overspending with low RoAS. On the other hand, set the target too narrowly, and you may not be able to use the ad campaign to its full potential.
Tip: A location-based targeted ad campaign is a good place to start. You can target places within a certain radius of your service area or the region where you’re operating from. This will all depend on the nature of your business.
Encourage Upsells and Cross-Sells
Ad channel selection and ad targeting are not the only things that can influence RoAS. At the end of the day, if you can increase the average order value of a campaign, then the RoAS will improve.
In this case, promos and bundles can come handy. Try offering discounts for bulk orders, freebies for product bundles, or cashback programs that customers can use for future transactions in your store.
Offering promos, freebies, and cashback can help you increase the revenue the ad campaign generates while securing customers willing to spend on more items from your store. This will increase customer lifetime value and thus affect the profitability of the ad campaign.
Return on ad spend determines the effectiveness and profitability of an ad campaign. This doesn’t mean that you can arbitrarily run an ad anywhere. You can optimise your ad campaigns and improve RoAS by choosing the right ad channel for your business and targeting your ads to your intended audience. You can also consider ways to upsell, cross-sell, and improve customer lifetime value.
If everything sounds a little confusing right now, don’t worry. You can always ask professional ecommerce business advisors for a bit of help.
The ECommerce Accountant is a firm of expert ecommerce consultants in Perth that can guide you in figuring out your ad spend situation. Team up with us today!