Proper marketing is the lifeblood of any successful business. In most circumstances, people won’t find out about your company on their own.
You’ll need to give your marketing team a sufficient advertising budget to meet your target marketing metrics. On average, companies in the US spend around 8.7% of their total revenue on advertising.
One of the most important details of your campaigns to consider is your return on ad spend (ROAS). This provides insight into how effective your strategies are.
We’ve created a guide with key ways you can improve your ROAS and take your performance to new heights. Let’s explore the information you should know.
Calculating ROAS
The process for calculating this metric is simple. You simply divide your ad campaign’s revenue by the amount of money you spend on it.
In context, this could look something like $10,000/$1,200. Your return on ad spend in this situation would be 8.33, meaning your revenue is over eight times what you spent on your campaign.
ROAS vs ROI
Many people make the mistake of assuming that ROAS is the same as return on investment (ROI). To clarify between the two, ROAS refers to spending on a specific ad campaign.
ROI is more of a general term that can include multiple types of spending over a period of time. For example, you can consider the ROI of an entire year’s worth of campaigns.
ROI also considers more than what you allocate toward campaigns. However, it’s worth noting that you calculate ROI the same way as you calculate ROAS.
ROAS vs ACOS
A common metric that businesses measure is advertising cost of sales (ACOS). Advertising cost of sales calculates the percentage of increase in ad spending you can expect to get in revenue.
For instance, your ACOS could be 150%, meaning you would get 50% more than you spent in revenue. Both ROAS and ACOS measure the same thing, but they provide the answer in a different format.
Improving ROAS
There are various strategies you can integrate to improve your ROAS. Understanding them will ensure you get the best results. Listed below are some of the most notable to keep in mind.
Reduce Your Ad Cost
It might seem obvious, but reducing your ad cost can substantially improve your returns. A great way to get started is by experimenting with your bidding strategy.
Businesses often overspend on ads when they don’t aim to optimize their bids. If you often manually bid, consider using automated bidding or vice versa.
A combination of the two is often best. You can also aim for lower positions in the search results to save extra money.
Not every company needs to have their name at the top of Google’s search rankings. You may need to rework the keywords you choose, as these have a large impact on your total ad spend.
Improve Your Landing Pages
No matter how effective your ads are, they won’t mean much if you don’t have solid landing pages. These should be a combination of captivating and concise.
Large walls of text are sure to deter potential customers. Poor calls to action (CTAs) will likely lead to people navigating away.
You can optimize your landing pages by using A/B testing to gain insight into the most effective methods. This involves directing traffic to multiple different landing pages that have minor differences.
You can then assess which ones perform the highest. Keep this tip in mind, as it can help you grow your company quickly.
Increase Your Customer Lifetime Value
Improving customer lifetime value (LTV) is a much more effective strategy than prioritizing new customer acquisition. First, you’ll need to have a solid understanding of how much your average customer is worth.
For instance, they might spend approximately $200 on your business during the time they interact with your brand. Retargeting campaigns, loyalty programs, and upsells can increase the LTV of each customer you engage with.
Using the above scenario, imagine if you brought your $200 LTV up to $250. Now, imagine you have a customer base of 50,000 people.
This is a $2.5 million boost in LTV. While it will take time to see all of this money come in, increases of this magnitude can allow you to scale your business and take things even further.
Use Google Shopping Ads
Google has a section called Shopping ads that many businesses overlook. These appear as small advertisements above the first search result.
Since these are at the top of the page, they’ll be the first thing your audience sees. The image you choose is essential to consider, as there isn’t much info for people to work with at first. When used correctly, Shopping ads can be one of the most effective tools you leverage.
Work with a Professional
The best way to get started is by hiring a professional. They have the tools, knowledge, and resources to help you hit the ground running. Finding one takes a bit of research, though.
You’ll need to explore their past reputation to see what other clients have had to say. Avoid hiring marketing agencies that don’t have a large amount of positive feedback.
Ensure you look into their pricing structure before making your decision. They should be fully transparent about what you’ll pay, and you should never deal with miscellaneous fees. If they deflect questions about what they charge their clients, this is a red flag you can’t ignore.
Are you comfortable communicating with them? It can be difficult to get the results you desire if you have trouble getting in touch with your agency.
The same can be said about working with professionals who don’t seem enthusiastic about your project. A bit of due diligence goes a long way when finding the ideal option.
Track This Metric Carefully
Your ROAS is directly correlated to how successful your marketing campaigns are. The tips in this guide will ensure that you use the right strategies to reach levels of performance that previously seemed unattainable.
Red Stone Studio prides itself on standing out from traditional marketing agencies. We do so by creating strategies tailored to each of our client’s individual needs. Get in touch with us today to learn how our tried-and-true processes can improve your company’s marketing results.
