Ad budgets are shrinking, and the competition for customers has never been higher. As marketers, we all know that staying competitive means improving performance while keeping the budget as lean and efficient as possible.
In other words, we need to increase ROAS.
What is ROAS?
ROAS, or return on ad spend, measures how paid media is performing. The return on ad spend formula is relatively simple on the surface: divide total revenue divided by total advertising costs to reach the ROAS ratio.
For example, spending $10,000 on a campaign and earning $30,000 in revenue means a ROAS ratio of 3:1.
But what is a good ROAS ratio? And how can you increase ROAS when ads are underperforming?
Before we get into increasing ROAS, there are a few considerations to keep in mind:
Every Channel is Different
Each advertising channel delivers a different ROAS ratio. For example, some sources say 4:1 is a good ROAS ratio for Facebook, while others tout 2:1 as a typical result on Google Ads.
It’s up to you to balance the marketing mix for optimal spending and long-term loyalty.
Every Business is Different, Too
Return on ad spend varies between businesses, depending on a long list of factors like growth goals, industry, audience size and more.
Mediatool can do the math for you with Conditional Calculations. More on that later.
ROAS is Not ROI
Return on ad spend can be viewed as a sub-metric of return on investment (ROI) if the marketing mix includes organic or above-the-line activity. ROAS complements other below-the-line metrics like cost per click (CPC) and average order value (AOV).
ROAS is Multi-Layered
ROAS ratios are based on last-touch attribution. Measuring returns at the channel and campaign levels helps a marketer understand the bigger picture and optimize the budget to increase ROAS.
How to Increase Return On Ad Spend
Improve Ad Relevance
This tactic can help with:
- Low click-through rate (CTR)
- High bounce rates
- Low landing page conversions
Knowing your audience is the key to creating engaging ads.
If your marketing metrics indicate that your audience is seeing your ad but not engaging, it could be a sign that the message is missing the mark. Here’s how you can use data to improve ad relevance and increase ROAS:
1. A/B Test
Experiment with variables and monitor engagement data to see which tactics, themes or content types work.
2. Align Messaging
Make sure your ad and landing page are telling the same story.
3. Review Audience Segmentation
Is your ad genuinely tailored to the segment, or can you do more to improve relevance?
4. Reduce Advertising Spend
This tactic can help with:
- CTRs that plateau
- Low-quality leads
Throwing more money at an ad campaign is not the smartest way to bring in more business. One reason for low return on ad spend could be that your budget is not optimized. You may be able to reduce outgoings while maintaining performance by targeting and experimentation.
5. Target the Right Keywords
Trying to rank for short, highly competitive keywords is expensive. Instead, look for relevant long-tail keywords in your niche that cost less and target buyers further down the funnel.
6. Mix up Your Bidding Strategy
Adjusting your maximum bid, implementing a manual bid strategy, or scheduling ads to run at specific times can reduce ad spend without impacting conversions. The key is to monitor results closely to find the optimal strategy.
7. Improve Ad Targeting
Narrowing the focus to specific audience segments (see above) and using retargeting to convert interested customers can lower ad budgets and improve returns.
Track and measure results more closely
This tactic can help with:
- Thinly spread ad budgets
- Low conversion rates
- Low ROAS at the campaign level
Comparing ROAS ratios at the channel and campaign level can shine a light on your audience’s behavior patterns. Becoming savvy with data will help you make better decisions and rebalance the marketing mix to increase ROAS.
8. Use Your Martech Stack More Efficiently
Only 58% of marketers use their tools to their full potential. Consider the latent potential in existing martech tools, or revisit the stack to find a tool better suited to your workflow.
9. Build a Robust Marketing Dashboard
With so much data from so many channels, cross-analysing ROAS can quickly become overwhelming. Mediatool’s Conditional Calculations feature simplifies the math. It saves time by integrating data from all your paid channels and making ROAS calculations based on conditions you set.
10. Consider the User Journey
Another advantage of a holistic campaign management platform like Mediatool is analyzing the marketing funnel in its entirety instead of trying to second guess from isolated events.
Assessing performance KPIs at every stage of the user journey helps target the points where engagement falls off. As a result, increasing ROAS becomes a matter of targeted improvements rather than a game of whack-a-mole.
Many Happy Returns with Mediatool
Mediatool is the all-in-one campaign management platform brands and agencies use to track, measure and optimize marketing campaigns.
With Mediatool, all your marketing metrics flow into one user-friendly dashboard, plus you have the power of flexible reporting and automations that calculate ROAS ratios.
All this marketing intelligence puts you in the driver’s seat and frees up time to focus on strategic improvements.
Learn more about Mediatool or see our new integrations for TikTok, Pinterest and Snapchat ads.
