What is ROAS? 4 ways to improve return on ad spend

Marketing and advertising campaigns are essential to running a business. But when you put effort and money into them, you need to look closely at the financial return they bring. The ROAS metric is a very useful tool for analyzing and judging, as accurately as possible, how well your marketing and advertising pay back. Let's look at Mona Media explains what ROAS is and how to optimize it effectively.

What is ROAS?

ROAS stands for Return On Ad Spend, the rate of return on your marketing cost. Measuring with ROAS works especially well for advertising campaigns on digital platforms.

Today, the forms of digital marketing are used more and more widely. That is why we need ROAS to judge how well each method works, so we can fix weak points or choose the most suitable approach.

Why ROAS matters

As noted, ROAS is the main metric for measuring how well advertising performs on digital platforms. That makes ROAS very important for businesses.

As you know, advertising and marketing campaigns take a lot of money, effort and time. So when a business decides to run one, it wants results that match the investment. With the ROAS figure, you can easily set your marketing budget at the right level.

That way, businesses get the most from what they spend.

How to calculate ROAS accurately

ROAS brings many benefits to a business, and to use it you need to know how to calculate it accurately. The basic ROAS formula is:

ROAS = DT/CP

In the formula above, DT is the total revenue earned during the advertising or marketing campaign. CP is the cost of running that campaign.

To make the calculation clear, let's work through an example. A company spends 100 million VND on one month of online advertising and marketing. Over that month, it earns 500 million VND in total revenue. So we have:

DT (revenue) = 500 million VND

CP (cost) = 100 million VND

ROAS = DT/CP = 500/100 = 5, or 500%

4 basic ways to optimize ROAS

In practice, ROAS directly shows the return that advertising and marketing bring to a company. Every company wants this figure as high as it can get. Below are the 4 most basic ways to improve ROAS.

Check for accuracy

One of the main reasons ROAS does not improve in advertising campaigns is using too many inaccurate keywords. Money, people and time get wasted with almost nothing to show for it.

So when preparing a digital marketing campaign, search for and choose the set of keywords that best fits your business's products and services.

Cut advertising costs

As you know, ROAS is calculated as ROAS = DT/CP. So if you want to raise it, cutting the advertising cost (CP) is a very effective option. To do that, optimize your landing page, because it makes it easier for customers to reach your company's products and services.

When the user experience gets better, more of your traffic turns into orders. The amount you pay for advertising then drops considerably.

The most important things to watch for a better user experience are: page load speed, and how fast pages load on mobile devices. Also keep in mind that different customer groups need different landing pages. This is critical, yet many companies and brands still pay little attention to it when they run ads.

Optimize revenue from advertising

Besides cutting costs, getting more revenue out of your ads is another good way to raise ROAS. Here the quality of your ad creatives matters most. When you design ads with appealing content that draws attention, more customers take notice. Purchases go up, and so does revenue.

Beyond content, ad creatives need to be convincing through specific statistics or quotes from earlier users. This is essential for persuading customers to choose your products and services.

Look into issues outside the ads themselves

ROAS mainly focuses on how well your ad campaigns perform. But to improve it, you also need to look at some issues that have nothing to do with what is inside the campaign.

One of the most basic is page load speed. It seems like a small thing, but it directly affects customer satisfaction and the decision to buy. Almost no one likes or buys from a website that is so slow it takes minutes to show.

Mobile devices are also extremely common today. So it is worth investing in an online store website that works on mobile devices and mobile operating systems.

ROAS is still seen as the yardstick for how well ad campaigns perform on digital platforms. With the ROAS optimization methods above, anyone can run advertising campaigns successfully, at a low cost and with the best revenue.

See more: How to calculate ROI correctly