We are diving into the deep end of ROAS, we hope you brought your floaties 🦆.
First things first, what is ROAS?
If you’re thinking it sounds kind of familiar but not quite, you’re right. ROAS and ROI, or Return On Investment, are sometimes mixed up because they’re very similar metrics.
While ROI more broadly measures the success of all your digital marketing efforts (think – ALL Of The Things! like your social media, SEO, content creation, partnerships etc etc etc), ROAS is the specific investment in advertising (so the amount of money you spend on your campaign vs how much you actually made back from that ad spend).
Second, it’s pronounced ROW-AS, just in case it tripped you up too. 🖐
We liken ROI to all the things we do as parents for our kiddos. From nourishment and clothing to the naps you sometimes have to force them to take.
SLEEP IS GOOD FOR YOU! From setting fair yet strong boundaries, all the kisses, and hugs, buying them yet another lightsaber, and saving for college.
All of those things and the thousand others are the investment you put into tending the little bit of your heart living outside your body with the hope that in return, they grow to be good, kind, well-rounded beings who love themselves, follow their dreams and maybe learn how to use silverware when eating or grow to love doing quiet activities.
ROAS is directly related to revenue – like how much revenue certain campaigns earn – and is the only Key Performance Indicator (KPI) that gives a value based on the money you spent.
Back to the ROAS of parenting, the investment specifically applies to the “return” on items you spend money on like a lightsaber, the piano lessons, and saving for college. (And probably way too many electronics. And sweets. (But they are magic, I tell you!).
Money spent is money spent but, as I’m sure you can guess from the examples, not all “ad spend” is the same.
Buying another lightsaber (or four + a replacement lamp) is not going improve one’s grammar or really help them in any adulting skill unless there someday IS a job listing for Jedi.
However, the sheer joy of having the lightsaber is hard to beat and joy is definitely necessary for living.
Similarly, cold traffic ads will not reap the same revenue as other ad types, yet without cold traffic and new users, the funnel will eventually run dry as will the money maker ads (which is not joyful).
The investment in piano lessons is a bit more costly, especially over time, but the return is subjectively higher. Music is a magnificent passion that can be studied and enjoyed through the years.
Those skills also funnel into other areas of growth and for some, can develop into a prosperous career.
Finally, let’s think of the investment of further education as a conversion ad, the big kahuna. More education is a large investment with strong potential to take an individual from one plane to another.
Conversion ads tend to be one of the spendier ad types but since the ad objective is purchases that bring in revenue, it is a super fulfilling type.
Fulfilling like finishing college without the debt.
The way to calculate ROAS is a simple equation of revenue from advertising divided by the cost of advertising.
Meaning, if your conversion campaign netted $5000 and the cost to run the ads was $1000, the ROAS would be 5. Said another way, for every dollar invested in ads, you received $5 in return which is pretty great, right?
The best part, you can track this data in the various ad platforms so make sure toggles are toggled and views are adjusted to include the ROAS in your metrics.
ROAS is the metric that indicates whether a campaign needs work or is ready to scale.
Like when your kid swears in front of the grandparents: it’s a learning opportunity to go over appropriate times for colorful language!
Bet you’re wondering how to start harnessing the power of this mighty analytic.
Great minds think alike, we daydream about this stuff all day! 😉
Our advice: just start. ROAS needs lots of data and data takes time (we think three months is a solid segment of data) so get started.
When you have the numbers, you can do the next thing which is learn! The goal of ROASing (yeah, we’re making it a verb) is to maximize it because the higher the ROAS = the more $$$ you net.
Optimization, customization, and close monitoring are key here.
Tracking the analytics, monitoring increases and decreases, adjust copy or images as needed, putting more money behind an ad that’s really rocking, or shutting one off that just isn’t performing well.
ROAS rates differ between industries, products, and gross margins, and ad objectives so monitoring your analytics, knowing your numbers, and tweaking as needed is the key to success.
As we keep saying, one of our most favorite parts of digital marketing is really seeing the customer journey in the analytics. Seeing every step is vital because it’s all connected and everchanging.
ROAS is a vital metric in digital marketing and should be heavily leveraged in your strategy.
If only there were KPIs for parenthood, a way to know what investments are most effective for raising good, kind, well-adjusted kids. Like how much screen time is really okay? Asking for a few thousand mom friends. 😉