If you are trying to learn about ROI, cost per conversion or click, or click-through rate, you probably have decided to start a PPC campaign for your e-commerce website.

But, do you know this metrics’ list is incomplete without ROAS.

ROAS.. what does that even mean? If you are asking that question, then we are here to help.

Read on to find:

  1. What ROAS means
  2. How is it different from ROI?
  3. How ROAS is important for eCommerce stores
  4. Proven ways to increase ROAS for eCommerce stores

Learning all these can help you design PPC campaigns for eCommerce stores with a more refined approach. Isn’t it all too intriguing?

Let’s get started!

What ROAS means

ROAS stands for Return on Ad Spend. This value tells how much revenue the eCommerce store generated out of expenditure made on advertising.

The expanded form itself tells how to calculate it.

If A = revenue generated

And

B = ad spend amount

ROAS => A/B = nx.

It denotes revenue as a multiple of the number of dollars spent in ads.

It may sound tricky instantly to find if the revenue is an outcome of the specific ad or ads.

Before the digital marketing era, it must have seemed impossible. It does not continue to remain incalculable in the present world, where everything can be boiled down to numbers. There is analytics available to find the user’s reaction towards the ad. The eCommerce companies usually find it through surveys, on-page research, and after-sales feedback, etc.

It might interest you further if you look at some information collected by research agencies like Nielson. These data science experts reveal that ROAS averagely is between $2-$3 across all industries.

e-Commerce stores are a bit more stringent in their approach. They stipulate a good ROAS to be anywhere between $4. However, which eCommerce store or stores have achieved it, is yet to be found.

How is it different from ROI?

ROI is Return on Investment. Investment here is the total of expenses made in all departments composing the business’s ecosystem. In terms of ad campaigns, it is calculated as a yearly figure where the annual expenditure made in ads is considered.

ROAS works a bit differently. It is calculated on a per ad campaign basis. And, is quite an intelligent metric in various ways. The reason eCommerce websites focus on RoAS, these days, is that this figure gives a more refined picture, as it takes several new factors into account, comprising:

  1. Whether the ad campaign is about launching and positioning the new product or is just re-strengthening the positioning: because in this case, the ad spend on a new product information spread is more than a reinforcement-centric ad campaign.
  2. Whether the ad campaign is focused on newer territories or is simply an attempt to reconnect with the existing customer base: Fathoming newer territories requires a more aggressive ad campaign; hence more investment is required accordingly.
  3. Seasonality-based products or products required throughout the year: Seasonality-based will demand varying amounts of ad spend; more aggressive spending is to be done when the season is just around.

In short, the ad spends do not remain constant throughout the year. These differ according to expected product demand fluctuations and other factors.

How ROAS is important for eCommerce stores

The eCommerce stores often wind up the business because they complain of less revenue generated from the investment made. It happens because the metrics chosen are not giving a holistic picture. RoAS and cost per campaign are two metrics that differ a lot in drawing a holistic picture.

For example,

Campaign A – Cost per conversion is $10

The number of conversions is 50.

Campaign B – Cost per conversion is $20

The number of conversions is 40

The figures indicate Campaign A to be more profitable. But, what does RoAS tells? Let’s find out.

RoAS considers the revenue generated and Ad spend made into the account. This means it lays more emphasis on how much revenue per conversion yield. Indeed, it is a more important thing to know. Even if the conversions are high, but if those conversions’ revenue is less, it may result in a loss to the company in the longer run.

Proven ways to increase ROAS for eCommerce stores

All these discussions indicate the need to focus on increasing ROAS. We share here some proven tips to do so.

  1. Make Ad copy more appealing.

Your Ad Copy must compel the readers to sit up and act. It is possible only when you show in a data-enriched manner how your eCommerce store will create a positive impact. So, go for figures than sticking to clichés. Secondly, include an urgency factor to incite action. You can use a countdown customizer to show the customers that they need to act fast.

  1. Maintain consistency in the message

If the ad says 50% off, ensure that the product page tells the same to the customers. Also, do not give complicated math to solve to customers. They might leave the idea of buying only if their confidence is challenged.

  1. Make Ads more mobile-friendly

Statistics reveal that more than 80% of the queries are generated after seeing an ad on a mobile phone. Consumers tend to check the ads on mobile phones while they are on the move. Also, a mobile phone remains beside a user almost 24 hours of the day make this device worth cashing for advertisement purposes. Thus, it is essential to make ads a treat to watch on a mobile phone it will add for smartwatches as well; just kidding!! of course, these should load in an instant!

  1. Research the way to tune down negative words

Negative words are those that are not creating revenue, though they may be getting you clicks! Use the tools to tell you about it in a clear and unbiased manner; accordingly, you play with the words and make the copy more revenue-yielding.

RoAS is a more trusted figure by all means. When you celebrate the nth year of your eCommerce store, say a little ‘thank you’ to this magical metric and keep it in your mind, always!

By admin

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