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Staying on Top of ROAS is Straightforward and Important

Posted by admin on September 7, 2019 in Advertising & Marketing |

Every business has limited resources, and making the most of those that are available will always be a key to remaining competitive. Spending money on advertising and other forms of marketing can pay, but it can also end up being wasteful.

In fact, many companies devote significant amounts of their financial resources to advertising without ever being sure that the results justify the investment. Measuring returns on advertising spending (ROAS) is a proven way to become better informed about the matter. Becoming familiar with a simple advertising ROAS formula will make it clear that this is a practical, accessible option.

Determining ROAS is Normally Fairly Straightforward

Most companies that do some advertising online today make at least some use of pay-per-click (PPC) advertising systems operated by companies like Google and Facebook. Since the basic principles can be transferred easily to other types of advertising, learning about how PPC ROAS is calculated makes for a good starting point.

The equation involved is fairly easy to understand but does include a number of different variables. Generally speaking, calculating ROAS for a PPC campaign will require having information about:

  • Spending. As the denominator of the entire formula, the money that will be spent on advertising will always be of fundamental importance when calculating ROAS. This should include both the budget devoted specifically to placing ads and any other costs that might arise.
  • Clicks. Each click on a PPC ad represents an opportunity to start converting an internet user into a customer. As the first step in a multistage process, though, clicks are not meaningful when taken out of context.
  • Landing page conversion. The page that a PPC ads points to needs to do an effective job of turning visitors into leads. Improving its associated conversion rate can boost ROAS significantly.
  • Lead conversion and value. Even once a lead has been generated, sales can lag behind. Knowing the rate at which leads convert into sales and how that translates into revenue will always be important.

An Important Metric to Keep Up With

Having access to figures like these will make it possible to determine the ROAS for any PPC campaign. The same basic ideas can be used to figure out the ROAS for any sort of advertising activity.

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