ROAS: What It Is & How to Use It

return on ad spend

You’ve probably heard of ROI—return on investment. We’ve certainly talked about it a lot. However, more recently, we’ve begun to move toward return on ad spend, or ROAS, since it’s more accurate for what we’re measuring.

What is Return on Ad Spend?

Return on ad spend is how much you earn in revenue for every dollar you spend on advertising. ROAS is only concerned with the cost of the ad campaign and not other additional marketing costs or cost of goods sold that should be considered with ROI calculations. Basically, if you want to determine which of your ad campaigns is working best for you, this is the metric you want to use.

How do you measure Return on Ad Spend?

what is return on ad spend

To measure your ROAS, you simply divide the revenue attributable to a specific channel by that channel’s ad spend. So if you made $100,000 thanks to your $5,000 Geo-Ads campaign, your ROAS is $20 for every dollar spent.

The whole goal of marketing is to generate revenue. But you won’t know if you’re succeeding unless you’re tracking and measuring your campaigns.

How do you find which campaigns led to what revenue?

That’s where revenue attribution comes in.

Revenue attribution is the act of determining which marketing efforts have led to sales.

With digital marketing, you want to know that the money you invest is resulting in sales. You also want to know how many of those sales can be attributed to each of your different marketing channels. That way, you can continue to invest in the strategies that are either bringing you more sales or those which have the highest ROAS.

To track the effectiveness of your different marketing channels, you’ll need to have access to the date from your ecommerce platform. We’ve done webinars about revenue attribution on both dutchie and Jane, so check those out if you’re using one of those platforms.

You’ll also want to install Google Analytics and enable Ecommerce tracking. This will help you see where your sales are coming from. You’ll be able to see how many visitors your website is getting, where they’re coming from, whether they’re making purchases, and how much their spending. These are crucial metrics that will help you identify the marketing channels with the greatest returns.

What Should I Track?

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To get started with revenue attribution, you need to be able to track conversions and sales.

A conversion is a desired action. In this case, we’re talking about clicks, and more specifically, how many clicks your ads are getting. We need to know what ads encouraged someone to buy from you. Each click is a touchpoint and we want to uncover which one lead them to convert into a sale.

Now, sometimes there’s not just one touchpoint, there are several.

Maybe your customer first searched for your dispensary on Google and checked out your website without making a purchase. Then, a few days later, they saw your Geo-Ad and clicked on it to make a purchase. The Geo-Ad become the touchpoint, and the sale—particularly the revenue generated from the sale—will be attributed to that marketing channel.

You can get all of this info from your Google Analytics—as long as you have ecommerce tracking enabled and have connected everything properly.

How Can I Improve My Return on Ad Spend?

Once you have your ROAS, you may want to raise it. We all want more value for our dollar, right? So how can you go about doing this?

I mentioned before that you need to have Google Analytics installed and ecommerce tracking enabled. This will let you see how many impressions and clicks you’re getting, in addition to your revenue by channel.

Using the different data you collected, you can determine which of your campaigns is scoring the most clicks, which is generating the most revenue, and which is getting the most impressions.

You can then begin to troubleshoot your campaigns to improve your ROAS.

For example, let’s say that one of your campaigns is getting massive impressions but not many people are clicking through. By comparing it to a campaign that is getting more clicks, you can run some tests to improve your results. Maybe you need to whittle your audience down so it’s targeted better, or maybe your copy isn’t compelling. By changing your call-to-action, you may get more clicks.

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Running different campaigns can really help you identify both problems and opportunities. Unfortunately, not everyone has the marketing budget or team to be able to do this.

When you work with a team like Foottraffik, you get the benefit of our expertise. Because we have run hundreds of campaigns across North America, we’re able to optimize ads for our clients more easily and get them a larger market share. And the best part is that you get the reporting. No empty promises—you will receive monthly reporting that shows how effective your campaigns are. If we spy opportunities, we’ll let you know. If we identify problems, we’ll troubleshoot them and keep you in the loop. Our goal is to maximize your marketing budget so that you see the greatest return.