What is RoAS and how to calculate it?

Return on Ad Spend, or RoAS for short, is similar to a report card for your ad campaigns. It measures the revenue generated for every dollar you spend on your ad campaign. Unlike click-through rate (CTR), which only measures the number of clicks your ads receive, RoAS goes a step further to specify the revenue. A high CTR might indicate good ad engagement, but RoAS tells you an ad is converting.

The formula to calculate RoAS is simple:

RoAS = Revenue from Ads ÷ Cost of Ads

For example, as an F&B brand, if you spend $1,000 on an advertising campaign and generate $5,000 in revenue, your RoAS would be 5:1. This means that for every dollar you spend, you earn five dollars in return.

Why is tracking the returns of ad campaigns important for SMBs?

Tracking RoAS is crucial because it highlights what ads are working and resonating with your audiences. This helps you shift your budget to the most effective strategies and eliminate the ones that aren’t working, helping you make better ad investments.

Additionally, many SMBs rely on tech giants like Google and Facebook for advertising optimization. While these platforms offer optimization tools for their channels, they fall short of providing comprehensive, unified marketing strategies. 

This approach leads to inefficiencies and missed opportunities, and businesses end up juggling multiple platforms without a proper strategy, making it difficult to track overall RoAS accurately. Tracking RoAS helps you set SMART goals for your ad campaign, ensuring a sustainable and profitable approach to marketing.

How to increase RoAS with simple ad strategies?

Improving RoAS requires a well-rounded approach, from optimizing ad placements to execution. Here are some effective strategies:

1. Optimize Ad Spend and Strategies

Optimizing ad spend depends on your bidding strategies, meaning how much you pay for ad placements. To find the most cost-effective option for you, it is a good idea to balance between both manual and automated bidding options like CPC (cost per click), CPM (cost per thousand impressions), and CPA (cost per acquisition). But what are manual and automated bidding?

Manual bidding allows you to set the maximum bid amount of your choice, so you have complete control over your ad budget. On the other hand, AI-powered bidding helps you automatically adjust your bids in real time depending on your goal at a particular time.

1. Choose the Right Platform

You could have the audience segmentation, budget, creatives, and everything else perfectly aligned. However, running a perfect ad on the wrong platform can make it all inefficient. It is important to understand that different platforms cater to different audiences. 

For example, if you are a B2B business, LinkedIn is a great opportunity for you. However, if you are a youth clothing brand, LinkedIn would get you little to no results as opposed to Instagram. To maximize RoAS, target the right platform by analyzing audience demographics and behaviors.

1. Create Effective Landing Pages

A poor landing page greatly interrupts your conversion journey. Creating personalized pre and post-click landing page experiences can significantly improve conversion rates. To maximize RoAS, ensure consistency in your ads by including storytelling, clear headlines, strong CTAs, and streamlined forms. 

Another crucial step in audience engagement is to prioritize mobile responsiveness and fast loading times with persuasive content and visuals. Consider personalizing landing pages for different audience segments to boost conversions and elevate your RoAS further.

1. Use Audience Insights

Ads don’t work if your approach is a one-size-fits-all, customers today need personalization. To achieve the best possible RoAS, you need to know your ideal customer’s demographics, interests, and online behavior. These insights allow you to segment your audience, creating distinct groups with shared characteristics. 

Using AI optimization tools like Thirdi cuts out the time you spend on optimization and targets high-value customer segments in minutes. The result? Laser-focused advertising with higher click-through rates, improved conversions, and ultimately, higher RoAS. You deliver a highly personalized message to the right person, maximizing the return on every advertising penny.

1. Refine Keywords

A stagnant keyword strategy leads to stagnant growth. It is crucial to regularly refine your keywords depending on the search queries that trigger your ads. Consider adding high-performing keywords that resonate with your audience and removing irrelevant ones that generate clicks but not sales. Explore long-tail keywords that offer a more targeted approach, attracting users with specific purchase intent. 

This ongoing optimization ensures your ads reach the right audience at the right time, maximizing their effectiveness and ultimately boosting your return on ad spend. Another optimization strategy is to target lower positions in search results where costs are lower but visibility remains high.

1. Increase Customer Lifetime Value (CLV)

Don’t settle for one-time sales. Instead, focus on increasing the lifetime value of your customers through strategies like retargeting campaigns, email nurturing, offering freebies, and upselling. 

Retargeting is a way to remind previous visitors of your products, encouraging them to return and complete a purchase or buy from you again. By encouraging customer loyalty, you elevate your CLV and increase the long-term returns from your marketing efforts.

1. Track and Re-optimize

Your ad journey does not end with perfect optimization. Regularly analyze your ad performance to identify the highest-converting ads. Use this data to refine and repeat successful strategies. 

AI tools like Thirdi can provide valuable insights like website visits, form submissions, and purchases to identify high-performing elements. Additionally, beyond data, also analyze broader notions like customer experience and product quality, ensuring a holistic marketing approach.

How does Thirdi help you with AI-led ad optimization?

Now that you know what strategies drive higher RoAS, Thirdi's AI-powered growth marketing platform makes it a reality for you. From optimizing your Google and Facebook ad campaigns to suggesting creatives, Thirdi ensures seamless customer journeys and better conversions. It analyzes your website data, guiding conversion funnel optimization. 

Thirdi also provides data-driven product pricing and bundling insights through a unified dashboard that helps you make informed decisions, increasing RoAS on paid ads. Moreover, you also have access to our team of experts who guide you along your journey and ensure your success.

In conclusion, increasing your return on ad spend requires a comprehensive, unified approach. By optimizing campaigns across channels, refining conversion funnels, and enhancing product strategies, you can simplify your marketing efforts while driving meaningful results. With Thirdi, you embrace this solution to maximize performance, profitability, and sustainable growth for your business.

Write to us at info@thirdi.ai for a free audit today!