Performance Marketing is the key to your brand’s success, but only if you know how to use it right. There are several tools and approaches in performance marketing that you can use for your brand’s specific benefit. If you interact with a leading/experienced performance marketing company in India, they would recommend you to think strategically while making the choices. They will not only recommend you but will also guide you through the relevant statistical approaches.
Apart from these, if you have read blogs and informative pieces about performance marketing, you must have read about several matrices. Such matrices help in calculating and justifying the results of Performance Marketing Campaigns of your brand. Among these matrices, an important one that every business owner is concerned about is ROAS. It is a key indicator of your performance in marketing success and helps make relevant decisions.
In this blog, we will help you uncover the concept of ROAS, why it is used in performance marketing, and what are the other associated significance of ROAS.
What is ROAS?
So now let’s begin with the most basic question, “What is ROAS”. It is just an abbreviation of Return on Ad-spends. To be precise it helps determine the returns that you have gained after investing in your brand’s performance marketing campaigns. For instance; you invested Rs. 1000 in your performance marketing campaign and received sales worth Rs. 10,000 from the campaign. Hence, such represents that for every rupee spent by the brand it earns Rs. 10 out of it.
However, the above-mentioned is just an example, but a real-life scenario can be much different and complex. As the final figure is dependent on several factors, identifying every factor can be a complex task for you. Hence, an expert must be hired who can help you better understand these elements and make decisions accordingly. Such elements can include a focus on direct spending as well as indirect spending.
Direct Spending includes:
- Rental/Subscription cost of the marketing/performance channel/platform.
- Marketer Service Charges.
Indirect Spends Include:
- Cost/Effort of Developing Performance Marketing Campaign
- Affiliate Commissions
- Cost of Platforms used to track ROAS/Performance Marketing Results
Benefits of ROAS
There are several key benefits of calculating ROAS for your brand’s performance marketing campaign. Such include:
- Identifying the most relevant and beneficial performance marketing channels/tools. Performance Marketers make use of a mix of marketing tools to elevate your brand reach and its performance. Hence, it helps you select the best possible channels that can deliver better results.
- Calculating timely ROAS can help you optimize your ad spending. Based on the ROAS, you can easily check for relevant platforms and can optimize your budget accordingly.
- Calculating real-time ROAS for campaigns helps to better align your business objectives with your marketing goals. For instance; if your campaigns are performing well, and you have a business objective to expand on control brand reach, you can make changes in your ad-spends accordingly.
- Having a constant focus on ROAS can help to check for the shifting trends in your ROAS. Such can either be a sudden increase or decrease in your ad returns. Further, it helps performance marketers to understand and reflect on market trends. Also, to plan for future marketing strategies accordingly.
- Beneficial for both the performance marketers and clients. It acts out to be a statistical approach that justifies the effort and results. Also, to make real-time changes in the implemented performance marketing strategy.
How to Calculate ROAS?
Now let’s move to understanding how to calculate ROAS for your brand. Calculating ROAS is as simple as dividing the Gross Revenue from ad spending by the cost of the ad. It will give you the final result in a ratio form. However, you can multiply the result by 100 to get ROAS results in percentage.
ROAS = Gross Revenue from Ads / Total Ad Spends X 100
However, there are certain elements that a leading performance marketing company in India considers while calculating ROAS. It includes the above-mentioned direct and indirect spending elements, team costs, and any other associated costs with the campaign. Also, performance marketers keep a specific focus on specifying the ad spends on different platforms.
Hence, it can be identified that ROAS is the most precise metrics format that needs to be followed to justify the success or growth of a performance marketing campaign.
Difference Between ROAS and ROI
A common confusion that people is regarding the ROAS and ROI. Both sound similar enough, but they are different from each other in terms of their aim and their approaches. As of the definitions, ROAS reflects on the returns that a brand gets specifically from its ad spends. On the other hand, ROI reflects the overall returns that a brand gets by investing in any kind of business activity. Let’s consider an example to better understand the difference.
An entrepreneur spent Rs.100 million in a year in setting up the business, buying relevant equipment, paying staff, conducting marketing, and other essential operational tasks. At the end of the financial year, it generated a revenue of 450 million. Hence, evaluating such figures will reflect on the ROI or returns that the brand got from its total investment.
Further from the Rs 100 million spent, Rs 20 million was allocated towards performance marketing. Such Rs. 20 million in the time attracted an audience, raised awareness, and led the targeted audience towards the webpage. Such activities generated Rs. 150 million, which is part of a total of Rs. 450 million. Hence to calculate ROAS, you simply need to focus on Rs. 20 million and Rs. 150 million.
Hope the illustration has helped you understand the basic differences existing in both the concepts. If you want to know more, you must connect with the leading Performance Marketing Company in India.
How Much ROAS is Considered to be a Good ROAS?
After discussing the significance and importance of ROAS, the next step/process is to understand the true meaning of a “Good ROAS”. Whenever interacting with a leading Performance Marketing Company, they must have indicated the significance of a good ROAS. But you must have wondered, how much ROAS is considered to be a good ROAS.
Based on the experience of leading performance marketers, it can be reflected that there is a minimum bracket set for ROAS. Anything above that set minimum limit is a good ROAS, and marketers always aim to maximize it.
A minimum ROAS should be 100% and further depending on the brand or business needs the limit for Good ROAS can be defined. Having a minimum of 100% is important so that the brand can at least recover the amount that it has spent on advertising. It can also be defined to be the break-even point of ROAS. Further, an ROAS with 140-150% is often considered to be standard, and if it reaches or crosses 200% then it is much better.
If you partner with a leading Performance Marketing Company in India, such as Verve Online Marketing they can help you cross the mark of 200% ROAS with their unique and specified performance marketing strategies.
Factors Impacting Your ROAS
Whether you are partnering with a leading Performance Marketing Agency in India or working on Performance Marketing Campaigns on your own, you must focus on certain key factors. Such include:
Ad Creatives
It is important for you as a brand to work on approaches that can help you target and retain approaches. Hence, it is highly recommended that you plan on developing creative ad formats that can influence audiences and lead towards your brand page. These creative approaches can involve the use of images, videos or any other creative formats.
Proper Targeting
It is further important for performance marketers and brands to invest in identifying their targeted audience groups in the marketplace. Investing in market research and audience segmentation allows the marketer to better understand the brand and to make decisions accordingly. Based on such information, further decisions can be made and performance marketing campaigns can be formed.
Channel Selection and Ad Placement
It is important for the performance marketer to wisely plan on their ad placement and channel selection in the digital space. Depending on your brand’s nature and type, appropriate channels are to be selected where your target audiences are mostly present. Such a wise channel selection can act out to be the key factor that can help in your improved ROAS.
Profit Margin and Product Cost
A key factor that impacts your ROAS is the profit margin or the pricing of the product being sold. The products with low ticket sizes often face the issue of low ROAS, as even if the website records high traffic and visitors, they have low average order value. Such low-order value results in generating a low overall revenue hence a lower ROAS.
Tips to Improve Your Campaign ROAS
It is highly recommended that whenever planning a performance marketing campaign for your brand, you must rely on the above-mentioned concepts. Along with such, certain key tips must be ensured to achieve better results. Such include:
Working on User Experience/Expectations
Performance marketers need to work on strategies that can contribute towards better/improved user experience. The campaigns need to be engaging and creative so that they can drive user attention. Further, a seamless process must be defined that can help in converting the audience. It can include the appropriate placement of the CTA button, and eliminating any unnecessary web pages that can hinder’s user’s experience or information delivery.
Conduct Campaign Tests
Even if you are an experienced performance marketer with years of experience, you must never miss out on campaign testing. Several strategic tools are available that can be used for testing the campaign variations or types and to make relevant decisions accordingly. Such testing can help to select the campaign format that can ensure better user generation for the brand’s website.
Consider your audience’s feedback
A most essential aspect to be focused on is your audience feedback. It can help identify the gaps or challenges in the existing campaign strategies and accordingly, improvements can be made. The audience feedback can help you understand even the smallest possible details, regarding the color pattern, language or their experience interacting with the campaign. Hence, it can help the marketer integrate relevant elements that are responsible for better conversion.
Make Use of Keywords and other Essential Tools
It is important to rely on the use of relevant keywords while developing your performance marketing campaign. Such can help you reach the right audience searching for the product/service. Hence, experienced performance marketers recommend the use of keywords and other essential approaches to strengthen your performance marketing campaign.
End Notes
Performance Marketing is a strategic tool that is essential for every business in the modern digital age. Hence, properly planned approaches are to be implemented that can ultimately lead to improved conversion. Hence, it is significantly important to partner with a leading performance marketing company in India, that can assist you with relevant marketing campaigns.
Verve Online Marketing is a leading Performance Marketing Company in India with a decade-old experience in digital marketing campaign development. Our marketer’s experts can help you better evaluate your brand and develop a campaign accordingly, that can help better audience conversion. So what are you waiting for? Connect with our professionals today, and elevate your brand presence in the digital world.
