Marketers are always looking for ways to judge the success of their campaigns. And, with the abundance of performance metrics and data available to PPC managers, there are several different ways to look at campaign performance. The challenge is knowing the right metrics to listen to.
While all data on your Google Ads dashboard is valuable to some degree, there are plenty of vanity metrics that can get in the way of what’s really important to the success of your campaigns. When you judge your success based on these vanity metrics, you can actually mismanage your campaigns and produce unprofitable results.
For this reason, the return on ad spend (ROAS) metric is often a game changer for many PPC marketers. This is a great angle to view your campaign performance because it injects costs and returns into your evaluation of strategies.
This discussion will look at what ROAS is and how it can be used to judge your pay per click efforts and prioritize wins and mitigate losses.
What Is ROAS?
ROAS stands for return on ad spend. This is quite literally how much money that you are generating per your ad spend. It’s a ratio of dollars earned on every dollar spent. For example, if your campaigns generate $500 of value and you’ve only spent $100, then your ROAS ratio is $500:$100, or 5:1. This means that you are returning $5 on every $1 you spend on ads.
Another way to look at ROAS is a measure of how efficiently you are spending your ad budget. For this reason, it approach to campaign performance is a critical game changer for marketers with small budgets. These accounts need to utilize their money to the fullest and stretch that scant budget as far as it will go.
ROAS Is Not The Same As ROI
An unfortunate number of advertisers don’t look close enough at the ROAS metric because they confuse it for ROI. It’s an understandable assumption. In both cases, you’re looking at inputs versus outputs. Or, what you are putting in versus what are you getting out. However, ROAS and ROI are not the same for a number of reasons.
- ROI is a much broader stroke. You use ROI when measuring the value of an entire strategy, where as it is used to assess the spend-to-returns ratio of a single campaign or even down to the keyword level. You would use ROI to measure how your entire PPC strategy is performing, not just a single part of it.
- ROI is often used as a predictive measure. You want to estimate what the returns will be if you invest. ROAS is not predictive. It is the returns based on what you’ve already spent.
- ROI is a more complete measure. It looks at margins, complete expenses and other angles that are not always associated with it. For instance, a simple ROAS measure will look directly at how much was spent on Google Ads for the given campaign, keyword, etc., and what the result was. This does not account for expenses like the man hours needed to launch and manage that campaign or distribution costs.
An easy way to understand this last bullet point is to consider the formulas used to calculate each:
As you can see, It is a simpler equation, whereas ROI is more complex. You can inject things like margins and expenses into the ROAS equation, but it is not always done.
3 Ways To Increase ROAS And Change Your PPC Game
Now that the basics of ROAS have been covered, it is time to look at strategic ways that you can grow your ROAS and up your PPC game.
Invest In Branded Campaigns
When people use brand names in searches, it is typically because they are on the verge of making a purchase. They know the exact brand that they want and it’s just a simple matter of finding the right vendor to purchase from. For this reason, branded search campaigns report 200-400% stronger ROAS.
Should you bid on your own brand’s keywords? It depends. In most cases, it isn’t necessary because customers will come to your website organically if they are interested in your brand-name products. However, there are cases where competitors may be bidding on your brand keywords in an attempt to show an alternative to shoppers to try and divert traffic away from your website.
Expand Your Negative Keyword List
There are two sides to improving ROAS: lowering costs or improving revenue. One way to do the former is to optimize your spending and eliminate keywords that are costing you money instead of making it. This is where your negative keyword list comes in handy.
The negative keyword list feature on Google Ads is a way to exclude your ads from appearing in front of certain keyword searches. Maybe it is a product that you don’t carry or something that just doesn’t relate to your business. In any case, you should exclude keywords that are wasting your ad spend.
Improve Landing Page Experiences
Your landing pages are the key to a higher ROAS. Visitors only arrive at these pages after they’ve clicked on an ad. With the pay-per-click model, you’ve paid for every one of these visitors. If your landing pages aren’t equipped to convert these visitors into revenue, then you’re spending money without producing returns.
You really need to look carefully at your landing pages and judge whether or not they are built to drive conversions. This is where data and testing are your best friends. First, you need to look at conversion data to understand what landing page elements lead to higher conversion rates. Next, you need to test different landing pages alongside one another to determine what experiences produce the best results.
If you’re not using ROAS to judge your campaigns, it may be time to start. It can be a great way to look at how efficiently you’re using your ad budget. Efficiency leads to more value and a healthier bottom line. With ROAS, you can grow a small budget into a much more sizable one overtime. That means more opportunities to invest and increase conversions and revenue!