Measure your return on ad spend and evaluate the profit earned for each advertising expense or marketing initiative.
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Ad Spend ($)
ROAS Calculator: What it is & How to Calculate for free?
What is ROAS?
ROAS which stands for Return on ad spend refers to the amount of revenue generated for every dollar spent on an advertising campaign. It’s an important key performance indicator that shows the profit earned for each advertising expense. So, why do we need to calculate ROAS?
Measuring ROAS gives you a clear picture of your marketing strategies. It helps every business owner to keep track of every dollar spent on their marketing campaign, measure the success, and therefore make better decisions. Based on the ROAS, you will clearly understand your campaign’s performance over time and make changes as needed. You can also compare different ads and determine the most effective: marketing channels, types of ads, hashtags, and keywords that yield positive results and drive more conversions.
How can we calculate ROAS? - ROAS Calc
In case someone still doesn’t know how to calculate return on ad spend, here we will provide you with the ROAS formula:
If you need an ROAS percentage formula, then:
ROAS = (Revenue from advertising / Spend on advertising) х 100%
Let’s take a closer look at this example! Let’s say you are running an ad campaign and invest $1000 into it. And you gain $3000 in revenue for that month, in this case, you can determine a ROAS of 3 (in another way: a ratio of 3:1 or 300%). It means that for every dollar you spend on this campaign, you earn 3$ in return based on this simple ROAS calculation formula. From that, you can make a better ad budget calculation. Easy, right?
How to use the ROAS calculator by NestScale?
After discovering the ROAS formula, you may wonder how to use the ROAS calculator by NestScale. Very simple to calculate ROAS, here is a step-by-step guideline to quickly measure your ROAS:
The next step is to start analyzing your ROAS, get a better advertising budget allocation, and optimize your ad performance based on this data.
How to determine a good ROAS?
Unfortunately, there isn’t the right answer for a good or excellent ROAS. That being said, a good ROAS should be greater than 100%. However, we highly recommend checking out your industry benchmarks on ROAS to get a sense of where you should aim.
Please note that you might be able to afford a lower ROAS on your targeting campaigns and then gain a higher ROAS in your retargeting and retention campaigns as a result.
Which factors influence your ROAS metric?
To maximize your ROAS, it will be better to understand some of the biggest factors that can help you break your ROAS.
Bidding strategy refers to the way you bid for your ads to show up in available spaces of paid advertising platforms. A smart strategy lets you get amazing business outcomes, find your best scaling level, and improve ad performance while controlling your cost per result.
Why is a well-crafted ad creative the key to unlock higher conversions? In fact, compelling and engaging ads have the power to grab users’ attention, spark their interest, and persuade them to give out their credit card details.
The right targeting strategy will definitely have an effect on your ROAS. How can you generate more leads and drive more store sales without targeting the right audience?
Different ad placements (Facebook, Instagram, Tik Tok) show different results with different costs and strategies. That’s why make sure you choose the right advertising platform for your business goals. Increasing ROAS will be easier than everything you expect!
4 Simple tips to improve your ROAS
Focus on high-quality ad content
A better ad creative will return to better results in any advertising campaign. Take a closer look and make sure that you are making stop-scrolling ads. Your ad video or image needs to catch user attention and educate them about what you are offering and how they can benefit from it.
High-performing ads are the key to taking your audience to the next steps and converting them from a lead to a customer.
Experiment with different ad formats
How about testing different ad creatives to determine the most effective for your business? The goal is to discover which ad version can generate more leads and deliver the best results.
Optimize for user experience
To simplify the customer journey and skyrocket your sales, why don’t you revisit user experience? Make sure that you:
- Minimize the steps required to complete the payment
- Provide different payment methods to make things easier for your customers
- Optimize for a fully responsive landing page
Measure ad performance
Don’t forget to always keep an eye on your ad performance. It’s highly recommended to keep track of your results, analyze the data and make informed decisions about your ad spending.
Optimize your ROAS for better ads and better revenue!
If you aim to improve your ad performance and explore deep audience insights, the value of the ROAS ratio shouldn’t be underestimated. By closely keeping track of your progress and optimizing for ROAS percentage, every business owner will have a clear picture of their investment and make data-driven decisions as needed
However, make sure you avoid all the human errors and miscalculations while calculating your ROAS. That’s why our ROAS calculator free tool is the best way to go!
Table of Contents
Frequently Asked Questions
The calculation for ROAS (Return on ad spend) is very simple: ROAS = (Revenue from advertising / Spend on advertising)
ROI (refers to Return on investment) is a ratio between net income and investment. Here is the formula: ROI = (Net income / Cost of investment)
Unfortunately, if you receive 10% ROAS, it means that you earn $10 for every $100 on an advertising campaign. In this case, you need to improve your ROAS by optimizing your ad creative or redefining your bidding strategy.
A ROAS of 3 shows that for every dollar you spend on this campaign, you earn 3$ in return.
The answer is yes. A 5x or higher ROAS is a significant indicator of an amazing ad performance.
Here’s the formula to easily calculate your break-even ROAS:
Break-even ROAS = 1 / Average Profit Margin %
Average Profit Margin = Average order value – average order cost
Average Profit Margin % = (Average profit margin / average order value) x 100
For more information, the breakeven ROAS is the ROAS where you break even on acquiring a customer. Let’s say you break even at 200% ROAS, if your ROAS is lower than this number, you will lose money on your ads.
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