When it comes to Google Ads and marketing in general, there are several metrics that businesses pay attention to determine how successful a campaign is. One of these metrics is ROAS or return on ad spend.
Analyzing ROAS is crucial and helps businesses understand what is working and what requires further adjusting. It shows them how much revenue they are generating from every dollar spent in the campaign. This post will explain what ROAS is, how to calculate it for Google ads and strategies you can employ to improve it.
What Is Return on Ad Spend?
ROAS is a marketing metric that measures the revenue generated from an advertising campaign in relation to how much was spent on it. It helps businesses determine how profitable their advertising efforts are. The ROAS metric is usually either expressed with a ratio or in percentage.
The reason return on ad spend is so crucial is that it can help marketers identify whether their PPC campaign is succeeding or failing. Without using this calculation, they are left in the dark about whether their advertising initiative is truly profitable.
Think of it this way, if a SaaS company is pouring thousands of dollars into a campaign but they are generating significant returns from the newly acquired users, they might think it is a great campaign in terms of gross revenue. That said, if they were to find out that they are actually spending more capital in acquiring the users than what they are making from them, it would no longer be that great.
This is what ROAS helps you to determine. It highlights whether you are using your ad spend in an effective manner.
How To Calculate ROAS in Google Ads
Calculating your ROAS in Google ads is rather straightforward. To calculate ROAS you divide the total revenue by the total ad spent. This will give you your ROAS in a ratio format and if you want it in percentage, multiply it by a 100.
ROAS = Total ad revenue / Total ad spend
One thing to note is that if you have to calculate the ROAS of various PPC campaigns, it might become a bit tedious and time-consuming to do it manually. Fortunately, Google ads can do it for you, you just need to set it up.
Step 1: The first step is to log into your Google Ads account and navigate to the “Campaigns” tab.
Step 2: Next you will want to click “column” and then select “modify columns”. From here you will be able to create a custom column that will calculate your ROAS.
Step 3: After you have created your custom column, give it a suitable name and description. Next, you will want to select “+Metric” and add the following formula: Conv. value / Cost
After following these three easy steps, your Google Ads account will now automatically calculate your ROAS for you. If you want, you can change the data format to show the ROAS value in a percentage.
What Is a Good ROAS in Google Ads To Aim For?
While this is an important question, it does not really have a straight answer. The truth is, that a good ROAS can be different for every company. Many times, it is dependent on the type of industry in which the business operates.
In addition, the type of Google ads campaign will also have an impact on the return on ad spend you will get. For instance, an awareness campaign might result in a fairly low ROAS. This is due to that such an ad campaign has very little to do with conversions, hence why the ratio might be low.
That said, according to Google’s data, the average ROAS for Google ads is 2:1. This means that for every dollar spent on digital advertising, the company gets back $2 in revenue. However, as stated, this can highly depend on the industry and type of business you have.
Many companies and marketers believe that a ratio of 4:1 is a good value to aim for. This is a solid ratio to aim for as this provides enough room to get creative with your ad spend. The reason for this is that a higher ROAS can translate over to a larger Google ads budget. This further increases the possibility for you to get even better returns for your company.
3 Tips to Improve Your ROAS With Google Ads
If your current target ROAS strategy is not giving you the results that you want, don’t stress too much as there are several things that you can implement. Here is a quick overview of some of them.
1. Refine Your Audience Target Strategy
You want to ensure that you target the correct group of people that will have the highest probability of converting. Do efficient research so that you have a clear understanding of who you want to target.
Be specific with the demographics you select and the message you want them to see. Paying close attention to your audience strategy can also reveal whether you are focusing your advertising efforts on the correct marketing channel.
2. Tweak Your Bidding Strategy
Another great way to increase your ROAS in Google Ads is to consider different bidding strategies. You can also use Google’s smart bidding strategies where an algorithm adjusts your ad spend in real-time based on certain factors.
There are several smart bidding strategies to choose from but the best one will depend on your business and what your campaign goal is.
3. Ensure Your Landing Page Matches Your Ad Copy
The importance of optimising your landing pages can’t be overstated. You want to ensure that when people click on your Google ads, that they are taken to a landing page that matches what the ad was about.
If it does not, the chances are high that the user will leave just as fast as they came. You want to ensure that if your ad is about gardening supplies, that garden equipment is what they are greeted with.
Also, consider other factors of your landing page such as the speed at which it opens, that there are strong call-to-actions and that copy is designed with conversions in mind. As conversions have a lot to do with what happens after a person clicks on your Google ads, you want to ensure they are welcomed with a well-optimised experience.
While on the topic of conversions, you will want to ensure your conversion tracking is set up correctly. therefore, clearly define your conversion events and ensure they are tracked properly.
Analyze Your Google Ads ROAS and Elevate Your Campaign Efforts
While calculating your ROAS in Google Ads is a straightforward procedure, it is an essential marketing metric that helps you determine your campaign profitability. By focusing on optimising your landing pages, implementing different bidding strategies and refining your audience target strategy, you can significantly improve your ROAS.
If you are struggling to get the most out of your ad spend, our experts are here to help. Snowball Creations is a digital marketing agency that primarily focuses on making paid advertising channels as lucrative as possible. Fill in the contact form below and let us help you increase your Google ads ROAS and elevate your campaign success.