Calculate Return on Ad Spend to evaluate and enhance your online advertising strategies.
Is your advertising making you money?
If you don’t know the answer to this question, you need a ROAS calculator.
ROAS helps you to understand how much money you make with your advertisement campaign.
A ROAS greater than 100% indicates that your advertisement campaign is generating more revenue than the cost of ads.
Let's understand what ROAS is, how to calculate ROAS, and how it can boost your online store's profits.
ROAS (Return on Ad Spend) is a popular marketing metric that helps you evaluate your marketing campaign's success.
You can use ROAS (Return on Ad Spend) to evaluate and enhance your online advertising strategies. You can discover effective methods and optimize future campaigns for improved business growth.
Though ROAS is an essential and powerful metric for online business, the ROAS calculation is easy. And you can easily calculate ROAS using a simple formula.
ROAS is equal to your Advertising Revenue divided by your Advertising Spend.
A simple Return on Ad Spend formula
ROAS = Revenue Generated from Ad Campaign / Cost of Ad Campaign
or
RoAS % = (Revenue Generated from Ad Campaign / Cost of Ad Campaign) * 100
For example, if your advertisement costs $20 and you sell a product for $120, your ROAS is 600%.
You can use the following formulas to calculate ROAS even without direct revenue numbers. These methods focus on conversion rather than total sales value.
Formula 1:
ROAS = Number of Ad Conversions / Total Ad Spend
Formula 2:
ROAS = (Number of Ad Conversions * Average Number of Sales Conversions * Average Sales Price) - Total Ad Spend
These formulas allow you to determine the Return on Advertising Spend (ROAS) without relying on specific revenue figures.
Good ROAS depends on industry and profit margins.
High-margin industries like luxury goods might see a good ROAS at 3:1, whereas low-margin industries might need a higher ROAS.
Brand awareness campaigns typically have a lower ROAS than sales-focused ones.
SEM campaigns often deliver higher ROAS compared to social media advertising.
General Benchmarks: According to research and data available these are the average retail ROAS:
While both Advertising Cost of Sales (ACoS) and RoAS are key metrics used in advertising, they differ in their focus and calculation.
ACoS is primarily used in the context of Amazon advertising and represents the ratio of ad spend to the sales generated from those ads.
RoAS, on the other hand, applies to advertising across various platforms and represents the ratio of revenue to ad spend.
Unlike ACoS, which focuses solely on advertising costs and sales, RoAS provides a broader perspective by considering all revenue generated, not just from advertising.