What Is ROAS & How Do You Use It?

What is ROAS?

ROAS stands for “Return on Ad Spend,” and it is an important factor in strategic marketing or campaigns. It can be beneficial when attempting to expand a business or make it more visible on various marketing platforms.

ROAS is the calculation of a percentage profit against what is used in a marketing campaign. In other words, it is a method of calculating how much money you spend versus how much you earn.

This way, you can clearly measure the return on your marketing investment.

The method can be used on different platforms and in a variety of contexts.

Overall, it is a method that can serve as the foundation of a marketing budget. ROAS can be used at the keyword level, which is the SEO priority, to gain an understanding of which product groups or keywords produce a positive return.

As a result, it is simple to identify which flaws as well as which priorities to use as a starting point for the company’s marketing. It may mean you need to change your current approach.

Looking at the returns can be critical for the entire campaign development and execution process. Not only is it important to create a good engaging campaign with a high reach, but so is reporting and impact measurement. Finally, in a process, it is rewarding to precisely assess the impact of the campaign and the financial return using ROAS.

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How Do I Calculate ROAS?

A ROAS calculation is simple and straightforward if you know your costs for the specific campaign or advertising as well as your revenue from the campaign.

When calculating ROAS, divide your revenue by your marketing costs, as shown in the illustration below.

ROAS

As seen in the above image, the formula is quick and easy to calculate what the return is from the company’s investment. 

If you spend THB 100 on advertising and have a turnover of THB 1,000 your ROAS will be 1000%, implying that you have received a return that is 10 times the initial investment.

As a result, one can easily obtain an overview of the money spent on advertising and marketing. It provides insight into the value of the marketing strategy you use to optimise the website.

Depending on the company, ROAS must be tailored to each individual company or industry, as in some cases, a ROAS of 200 percent may be acceptable, whereas in others, a ROAS of 1000 percent is required to achieve profit.

As a result, there is no correct or wrong on what constitutes a good percentage.

There are various perceptions of what makes sense in a given business based on a company’s costs and profit margin. So, depending on what the company trades or provides, the acceptable turnover value varies.

Measurement tracking and ROAS are important, and they are not always expensive or time-consuming to investigate. You can, for example, use free tools like Google Analytics & Facebook Ads Manager to take a closer look at your conversions and revenue, which can provide you with concrete figures on how a campaign performed. This information can then be used in the calculation of ROAS.

Of course, in order to determine whether a campaign was successful, you must always remember to define your goals from the beginning. After all, it is not always the financial objectives that drive success. You may have also defined your goals in terms of increased visibility, increased traffic, increased publicity, and a variety of other goals.

However, financial targets are often the foundation of campaign ads and this is where ROAS is frequently used.

How Should I Use ROAS?

It is easier to keep track of how much money you get back from the money you invest in ads if you use ROAS as an essential sub-element of an objective. Companies can easily measure the impact of advertising campaigns and advertisements in this manner.

It is an excellent opportunity to assess which strategies are effective. This also gives you insight into what you can pursue successfully in the long run and what does not. You can start your strategic work with upcoming digital marketing based on your evaluative ROAS.

When it comes to online advertising, SEO, Google Ads, Facebook AdsSocial Media marketing and other types, ROAS is an important element.

This type of quantitative data is a factual way of learning what contributes to a company’s success while also being useful for future budgets, strategies, and overall marketing decisions.

If you’re looking for help with digital marketing on Google, Facebook, LinkedIn or other channels, you are welcome to contact our digital marketing agency Thailand. We will help you with data-driven solutions to achieve a higher ROAS.