Published on: 16 Jan 2023
Reading time: 5 minutes
The primary aim of every marketing strategy, once you get rid of the nuances that surround it, is to help a brand achieve growth while also ensuring that advertising dollars are being spent efficiently. The brainstorming, creation, scaling, and launch of digital marketing campaigns, despite being a crucial aspect of any brand’s growth, are only half the battle, as brands and advertisers also need to keep track of the impact the campaign has on overall growth. This is where a simple formula for return on ad spend (ROAS) calculation can prove to be quite helpful.
For understanding the overall effectiveness of a marketing strategy, you will need to calculate advertising ROI, which will show how the ads are affecting the company’s bottom line. On the other hand, the ROAS formula is used to measure the spend efficiency for specific advertising channels and provides marketers with a close-up view of campaign performance and efficacy.
You can use a simple formula for your return on ad spend calculation.
ROAS = (Total Revenue Generated by Campaign) ÷ (Total Ad Spend of Campaign)
While it is always important to keep track of metrics like the click-through rate (CTR), ROAS calculation is much more useful when it comes to measuring the performance of a digital campaign, as the return of ad spend also accounts for the number of conversions under the campaign instead of just counting the clicks the campaign achieves.
Simply put, in marketing, ROAS, or return on ad spend, is calculated as a ratio of the revenue generated by a campaign to the total cost of the campaign. With this formula, the ROAS can provide a comprehensive understanding of how effectively you managed to communicate the message to your target audience.
It is also important to note here that relevance is a key driver here and the more relevant your message and delivery are, the higher your return on ad spend will be.
There is no set formula for ROAS improvement that you can just follow, as the approach and strategy involved will vary with each brand story and campaign. However, there are certain tips that you can implement to significantly improve your marketing ROAS and consistently deliver relevant, targeted, and effective campaigns to make the most of your ad spend.
Total campaign costs being one half of ROAS calculation, reducing the amount of money that you spend on your ads may sound like an obvious way to improve marketing ROAS. Some tactics for controlling spends without reducing ad returns are:
The second part of your marketing ROAS is the ad revenue a campaign brings in. The best way to improve the return on ad spends is by having a compelling post-click customer journey in place.
Customer lifetime value refers to an estimated revenue that a customer will generate on average throughout their relationship with you. It is a known fact that it is easier to sell to users who are already your customers and that it is less costly to manage existing customer relationships as compared to acquiring new customers. That is why a focus on improving customer lifetime value is important for increasing your return on advertising spend. Common methods include:
Sometimes, the issues that may be hampering your marketing ROAS are unrelated to ad strategies. Analyze the customer journey you have created, including the CTA route that your customers are being asked to navigate. If the post-click experience is confusing, complicated, or involves too many clicks, your conversion rates will definitely suffer. Other issues may even be related to the products themselves or the purchase process. User experience is extremely important for campaign success, and you must ensure the optimization of the same.
MarTech or marketing technology has come a long way in recent years. It offers numerous advantages, features, and capabilities to marketers that they can use to create some of the most compelling and engaging digital ad campaigns. A proper creative management platform, like Airtory, allows you to build interactive ad creatives with rich media elements, scale ad units, optimize active campaigns in real-time, provide real-time metrics and reporting regarding campaign performance, and much more. Platforms like Airtory make it extremely easy for marketers to gain audience and campaign performance insights to modify their strategies in the best possible way to enhance returns on advertising spend.
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