ROAS is essential to determine whether a campaign is producing the revenue you expect it to and whether you should renew the campaign or bring it to a close to avoid wasting more of your ad budget.
There are several reasons why your ad campaign might not be performing as well as you expected it to; including the use of improper keywords, poor audience targeting, having an unoptimised landing page or low conversion rate as well as only looking at ad spend and how much revenue the ad brought in, rather than keeping other costs in mind on top of this.
It’s also important to consider any other sources of revenue that your advertising may have contributed to. Taking a more holistic view of your advertising will help you better understand your overall objectives.
How to improve your ROAS
Remarketing is a good way to get the most out of what is being spent. It allows you to reach users who are already partly invested in your product or service. This is more likely to result in higher conversion rates than if you pushed outbound marketing strategies.
For example, emailing a customer after they’ve made a purchase to get 10% off their next order increases the customer's lifetime value. Or what’s even better, is if your company uses a subscription model, much like Graze does, you can send out an email where you can refer friends to receive a reward. Graze puts this into practice by encouraging people to refer five friends in order to get a free month of Graze boxes. This way, you’re paying for one conversion but potentially getting five more.
Using customer lists to improve your ROAS is another good remarketing idea. Customer lists are made up of customers who have been defined based on specific criteria, such as current buyers or buyers who made a purchase during a particular period. This allows you to study your customer’s habits, find out which customers your ad is best suited to and reward them. Customer lists can therefore be used to email targeted customers to introduce new products and services your company has released.
Conversion rate optimisation can be used to remove friction, optimise landing and product pages and reduce cart abandonment. As a result of this, more people who click on your ads will be converted into paying customers, customers will be encouraged to buy more, and the number of people who complete a purchase on your site will increase.
Sometimes, it pays off to spend more on a conversion, as long as you can reap the rewards afterwards. If your business uses a subscription model, another conversion rate optimisation technique is to honour customers’ first month at a discounted price. Your business will still benefit from this as subscription models provide lifetime value and bring in money every month. However, if you’re not a subscription business, you can upsell. This involves the use of ‘you might also like’ style pop-ups at the checkout. These should be relevant or complementary to what the customer is buying and not too expensive, or an alternative is to offer a minimum spend to qualify for free shipping. This will allow you to increase your average order value while still paying the same amount for a conversion
So, if your digital marketing strategy often uses paid ads, tracking your ROAS can be used to continuously refine your ad spend so that your business can generate the most revenue. Additionally to this, many people may get to know your brand through ads but might not purchase until later. Not everything can be directly tracked to paid ads so more purchases may be down to ads that ROAS doesn't take into account.