When you run a marketing campaign, of course you want to know how effective it is. It is important to evaluate what a campaign produces and whether that outweighs the costs you have put into it. You can then look at the return on advertising spend. In this article, we’ll explain what return on ad spend is, how to calculate it, and what the pros and cons are.
Meaning and calculation of return on advertising spend
Return on advertising spend, abbreviated as ROAS, is a metric that can be used to measure the success of a campaign. ROAS is calculated using the cost and revenue of a marketing campaign. The return on advertising spend can be calculated using the following formula:
ROAS = revenue / cost.
By dividing the return by the invested amount, you calculate the return per invested euro.
The advantages and disadvantages of ROAS
The biggest advantage of calculating the return on advertising spend is that it provides insight into what search engine advertising directly delivers. This gives a marketer relevant insights. After all, a losing campaign doesn’t seem worth it.
Here lies the danger of a metric like ROAS. In many cases, ROAS only measures the direct amount that a campaign generates. Even though a campaign may not directly generate sales, it can contribute to a company’s brand awareness. Something that can be of great value for the success of other campaigns.
Return on advertising in e-commerce
Nowadays, enormous amounts of data on the internet behaviour of consumers are stored. This makes the ROAS an ideal metric to use for online marketing campaigns. With tools such as Google Analytics and Google Ads, the added value of campaigns that do not directly generate money can also be included in the ROAS. So you can get a more complete picture of the return on advertising spend.
When do I use ROAS as a metric?
The choice for ROAS as a metric depends entirely on the objective of the marketing campaign you are running. A campaign with the objective of creating brand awareness is better evaluated based on the number of (unique) impressions, for example. If the goal is to generate sales, then ROAS is an appropriate metric to assess the campaign.
At Ecoteers, we are in the business of increasing the return on advertising for our clients every day. Do you also want an improved ROAS of your online campaigns? Please feel free to contact us. Our full online advertising offering can be found here.