How to Calculate ROAS to Support Your Business Analytics Strategy

How to Calculate ROAS to Support Your Business Analytics Strategy

How to Calculate ROAS to Support Your Business Analytics Strategy

&Marketing, and marketing, outsourced marketing strategy

Written By Sydney Thomas

Advertising campaigns cost money, and many companies need help understanding their Return On Investment (ROI) or Return On Ad Spend (ROAS). Most often, this is from a need for proper tracking and struggling to assign monetary values to your ads’ results (unless you are eCommerce.) Without ROAS, companies are left without insights into deciding whether or not to continue ad campaigns or optimize based on the results. Calculating ROAS is a foundational part of any organization’s business analytics strategy.

To make the best business decisions, you must understand and calculate ROAS. This blog discusses what ROAS is, how to calculate it, and what a good ROAS might look like.

What is ROAS, or Return on Ad Spend?

Return On Ad Spend measures the cost-effectiveness of your advertising campaigns. It helps businesses determine whether they are making a positive return on advertising costs or losing money due to not making enough from advertising.

A high ROAS is a positive indicator of performance, whereas a lower ROAS indicates that your campaign has an opportunity to be optimized. It’s also important to consider different marketing campaigns (such as Social Ads vs. Search Ads) and compare returns as different channels will result in different performances.

How Do You Calculate ROAS?

Revenue / Cost: The simple way to calculate ROAS to support your business analytics strategy is by dividing Revenue by Advertising Cost. The advertising cost includes:

  • The campaign budget
  • The campaign manager’s time
  • Any other outside costs that you may have for that particular campaign.

For example, if a specialty foods brand spends $10,000 on a Google ad campaign and generates $30,000 in revenue, the formula is as follows:

$30,000/$10,000 : $3 or 3:1

In this example, a 3:1 return on ad spend means that for every $1 the brand spent, it generated $3 in revenue.

What is a Good ROAS?

Every brand and industry will have its own “good” ROAS. For some companies, a 3:1 ROAS is excellent, while others would consider that to be underperforming. If your ROAS is low, then you might increase ad spend to get a better return. On the other hand, if your ROAS is high, you may consider how to keep the campaign performing well and look into ways to mimic that effort in lower ROAS campaigns.

Sources indicate that the benchmark ROAS for Google Ads campaigns is 2:1, an average return of $2 for every $1 spent. Further, focusing specifically on Google Search Network, that amount increases to $8 for every $1 spent.

The 3 Benefits of Calculating ROAS

Calculating ROAS will help you:

1) Identify Scaling Opportunities

ROAS allows companies to determine the effectiveness of individual ad campaigns. By examining each campaign, businesses can determine which type of ads are performing well and scale those ads to drive the best results. Tip: Remember that a solid business analytics strategy involves constant monitoring. ROAS may decrease when you scale your budget, so be sure to consistently track your ROAS while scaling.

2) Determine Budget Re-Allocations

Spending a lot of money on ads does not always mean you will get high sales. On the other hand, spending wisely on your best ads can drive more sales. ROAS calculation results help you identify the ad sets on which you are overspending. In these cases, you should reduce your budget to protect your business from losses.

3) Guide Better Business Decisions.

Successful marketing strategies are rooted in data, and ROAS is one of your top performance indicator metrics for digital advertising. With multiple channels such as Social, Referral, and Paid Search, ROAS will help you determine which acquisition source will help you achieve your business goals.

Take Control of Your Business Analytics Strategy Today

Optimizing your marketing campaigns and properly planning your budget becomes easier when you have a solid business analytics strategy in place, and calculating ROAS is essential to supporting that strategy. You can gain a deeper understanding of performance metrics and scaling opportunities by using our ROAS calculator.

About Sydney Thomas

Marketing Director Sydney Thomas helps clients create, implement, and optimize campaigns in their Google Ads and Microsoft Advertising accounts. While ensuring that clients are getting the most out of their pay-per-click accounts, she also supports creating websites to improve SEO and supports paid social network advertising on Facebook and LinkedIn.

About &Marketing

&Marketing provides the robust outsourced marketing department growing companies need without the high overhead costs of big agencies or full-time employees. Our variable model empowers businesses to reach their growth goals through access to the guidance and expertise of senior level strategists and a flexible execution team.

Are you facing challenges of your own in generating leads and meeting your business’ growth goals?

We’d love to learn more about your challenges and how a coordinated marketing approach might help take your organization to the next level.

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Should You Turn Off Digital Advertising During Economic Uncertainty?

Should You Turn Off Digital Advertising During Economic Uncertainty?

Should You Turn Off Digital Advertising During Economic Uncertainty?

&Marketing, and marketing, outsourced marketing strategy

Written By Sydney Thomas

When the economy takes a turn for the worse, it seems like everything is tanking. Less money is coming into your business, and everyone is rightfully concerned. Companies go into survival mode and immediately start thinking about how to cut costs and hold on to revenue. Immediately, advertising costs are on the chopping block. It seems logical to turn off your Google Ads during a recession because it’s an easy lever to pull that will immediately cut down costs.

Maybe your revenue won’t take a big hit! Maybe it’s the right move. But more than likely, turning off your digital advertising will only negatively impact your business, despite your instinct to pull the plug.

Your Competitors Will Probably Turn Off Digital Ads During a Recession

Let’s face it—most businesses, especially smaller ones, will probably turn off digital advertising during a recession. After all, they’re having the same thoughts and anxieties we mentioned at the beginning of this article. Guess what that leaves?

  1. a less competitive landscape for you to maintain your online presence
  2. lower costs to advertise because there are fewer people in the space
  3. opportunities to increase your brand awareness

Even if people aren’t ready to convert on the spot, guess whose name they’ll remember when they are?

We recommend taking advantage of the cheaper ad costs. With fewer advertisers in the mix, the cost-per-click (CPC) will be far lower than usual. It’s a great opportunity to actually reduce your cost-per-acquisition and further your overall brand awareness.

Digital Ads Will Still Make Money During a Recession

In 2008 and 2009 during the last recession this country experienced, Google Ads still made money. While their profits didn’t grow exponentially, they left the recession in a good place. Why? Because people will always use Google and therefore Google Ads, and people will always need to advertise online. Google also dominated during the pandemic as users flooded the internet during the stay-at-home orders. You can see a similar pattern in Facebook Advertising.

Sheryl Sandberg, Facebook’s longest serving chief operating officer, stated in July 2022, “Despite the current challenges, I’m very confident for the long term,” Sandberg said. “We’re facing a cyclical downturn, but over the long run the digital ad market will continue to grow. Advertisers will go where they get the highest return on investment and ability to drive their business.”

Digital ads, whether on Google, Facebook, Bing, or elsewhere, is a consistently growing business and isn’t going anywhere any time soon. As far as anyone can tell, people will always use Google to find the products and services they need.

Recessions Aren’t Forever

The average length of a recession is 17.5 months. While it may be a miserable 17 months, it will come to an end. Following a recession, the economy and markets return to normal at minimum, and often turn into a period of huge growth and opportunity. If you keep running your Google Ads during a recession, you’re bound to collect qualified leads to follow up on when the economy improves. You want to be there when that happens— with an already established, well-oiled digital advertising campaign that keeps you at the forefront of your audience’s mind when they’re ready to buy.

Acquisition Channels Are Directly Connected to Your Conversion Channels

It seems so simple to turn off the channels that aren’t directly connected to your revenue. Why keep spending money on the channel that doesn’t immediately convert? But if you turn off your acquisition channels, your conversion channels will suffer later. In most circumstances, your path to conversion isn’t as simple as 1-click to purchase. Your marketing funnel more than likely involves multiple touchpoints, and your acquisition channels shouldn’t be undervalued just because you can’t see the immediate purchase.

Advanced digital marketing experts are always watching what is referred to as assisted conversions. These are ways marketing channels contribute to a sale on other channels. A simple example is when someone clicks on an ad, browses and leaves, then later goes directly to the website and converts. “Direct” (traffic that goes straight to the website’s URL) may get the credit in your analytics platform, but it may not have happened without those ads. Turning off your ads may hurt your other channels because of assisted conversions.

What to Do With Your Google Ads During a Recession

While we don’t recommend immediately pausing your ad campaigns as the quick fix to save money, it is a good time to evaluate your spending and campaign types. Keep your pay-per-click (PPC) running, but be more efficient and mindful about what you’re spending.

You also need to be thinking long-term. In a recession, it may be tempting to start running ads for the first time in hopes that it becomes a quick revenue fix. This rushed approach often leads to dashed hopes and inflated expectations. Many campaigns take months to get into an optimized groove, so most of the time those won’t turn a profit quickly.

If you aren’t sure whether to stop, start, or adjust your Google Ads during a recession, we have good news! To help businesses during this time, we are offering a complimentary digital ads audit to help you make the most of your marketing money right now. Spaces are limited, so grab your spot today.

About Sydney Thomas

Marketing Director Sydney Thomas helps clients create, implement, and optimize campaigns in their Google Ads and Microsoft Advertising accounts. While ensuring that clients are getting the most out of their pay-per-click accounts, she also supports creating websites to improve SEO and supports paid social network advertising on Facebook and LinkedIn.

About &Marketing

&Marketing provides the robust outsourced marketing department growing companies need without the high overhead costs of big agencies or full-time employees. Our variable model empowers businesses to reach their growth goals through access to the guidance and expertise of senior level strategists and a flexible execution team.

Are you facing challenges of your own in generating leads and meeting your business’ growth goals?

We’d love to learn more about your challenges and how a coordinated marketing approach might help take your organization to the next level.

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How To Implement an Effective Paid Search Strategy

How To Implement an Effective Paid Search Strategy

How To Implement an Effective Paid Search Strategy

&Marketing, and marketing, outsourced marketing strategy

Written By Sydney Thomas

On

We’ve all seen paid search results, more than likely every day. Whether you want to make a purchase or not, when you type a search into Google, paid ads are almost always the first results you see. A challenge would be to find a search query that DOES NOT produce paid ads at the top of the results. It’s an excellent way for businesses of any type to attract new prospective customers when the organic results can’t pull in the traffic they want.

The options businesses can incorporate into a paid search strategy are limited only by the team’s creativity. Google is the most widely known and used, but don’t limit your thinking to just one approach (or search engine!). Below are some tips for implementing the most effective paid search strategy.

Paid Search Strategy Step 1: Determine Your Values

Don’t do anything until you spend time determining the following for your business:

  1. Average lifetime value of your customer
  2. Percentage of actions on your website that turn into a customer
  3. The value of those actions

Knowing these three critical pieces of information about your business will drive everything you do. Paid ads should improve the profitability of your business. No one wants to spend more money than they’re making, and your business should know what they’re willing to spend to gain new customers. Then, while running your paid strategy, you can quickly determine your Return On Ad Spend (ROAS) and whether or not the ads are paying off.

Paid Search Strategy Step 2: Identify Your Target Audience

Before you decide how to attract new customers, you first need to know who your customers are and where they spend time online. This is the first step in driving your paid search strategy. If you don’t know who they are and what internet spaces they hang out in, you will likely make a mistake in choosing a paid strategy focus.

Paid Search Strategy Step 3: Consider Google Ads

Google Ads is often the clear choice for a paid search investment. They handle over 3.8 million searches every minute with over 270 million unique visitors. More than likely, your prospects use Google for something. But are they using Google for what you need, and is it affordable? For eCommerce products, it’s frequently the right move. But other businesses may not want Google Ads as part of their strategy.

For example, showing ads for “personal injury lawyer” can easily cost over $100 per click (it’s a popular, therefore expensive term to target). Researching the cost of your keywords is an essential part of determining your strategy.

Paid Search Strategy Step 4: Match Your Audience to Other Platforms

Google is undoubtedly the Goliath in the room. But there are many other platforms available, and your prospects may be there waiting to be enticed into your sales funnel. After researching your target audience, you can decide which platform makes the most sense. Here are just a few of the advertising platforms you can consider, depending on the demographics of your target audience:

  1. Facebook/Instagram
  2. YouTube (part of Google Ads)
  3. TikTok
  4. LinkedIn
  5. Reddit
  6. Quora
  7. Microsoft Ads (also includes DuckDuckGo)
  8. Amazon
  9. Pinterest
  10. Twitter

If you sell fashion items to girls ages 13-25, TikTok may be a no-brainer, while LinkedIn would be an epic fail. If you sell IT services, LinkedIn has your customer, while Pinterest would be a swing and a miss for you.

No matter who you’re trying to reach, what your offer is, and the depth of your ad spend pockets, make sure you target the right people in the right places with the right message.

If you’re interested in knowing more about &Marketing’s approach to paid advertising as an outsourced marketing department, contact us and we’re happy to discuss your business goals and how ads can help you reach them.

&Marketing leverages the power of Business Intelligence to gain insights on paid search performance and help our clients make informed decisions. To learn more about our BI and analytics process, download our eBook below.

About the Author

Marketing Director Sydney Thomas helps clients create, implement, and optimize campaigns in their Google Ads and Microsoft Advertising accounts. While ensuring that clients are getting the most out of their pay-per-click accounts, she also supports creating websites to improve SEO and supports paid social network advertising on Facebook and LinkedIn.

About &Marketing

&Marketing provides the robust outsourced marketing department growing companies need without the high overhead costs of big agencies or full-time employees. Our variable model empowers businesses to reach their growth goals through access to the guidance and expertise of senior level strategists and a flexible execution team.

Are you facing challenges of your own in generating leads and meeting your business’ growth goals?

We’d love to learn more about your challenges and how a coordinated marketing approach might help take your organization to the next level.

Google is Phasing Out the Broad Match Modifier Match Type

Google is Phasing Out the Broad Match Modifier Match Type

Google is Phasing Out the Broad Match Modifier Match Type

&Marketing, and marketing, outsourced marketing strategy

Written By Sydney Thomas

On

Google’s roller coaster ride is at it again! In early February, advertisers opened their email only to be surprised with Google’s latest update. In a bold move, Google Ads is removing one of the most popular keyword match types. Starting now, Google will begin gradually including broad modified match (BMM) type behavior into their new version of phrase match. By July 2021, Google will have finished phasing out the use of the broad match modifier match type, and they will act solely as the new phrase match.

Why is This Change to Google BMM Match Type Important?

The BMM match type has been the cornerstone of the account structure for many advertisers, and for some, this is a pretty big deal that will require an account structure overhaul. Instead of focusing on word order combinations, advertisers have been able to use the BMM type to capture traffic with queries containing specific words, but not specific to word order or intent. It has allowed more control over the advertiser’s interpretation of user intent and didn’t rely on Google’s interpretation, which often brought in traffic the advertiser didn’t find relevant. Google is letting us know this change is going to reduce the irrelevant traffic and improve both the user and advertiser experience. They will no longer blindly match a search query to a keyword without consideration of the intent of the search.

To understand this better, let’s take a look at the example below. Of course an advertiser for accounting services isn’t going to want to show “What services do accounting firms offer?” But once the advertiser sees this query, they can add it as a negative keyword and not worry about that search again, while also still capturing impressions for “services for accounting nearby” — which may not have shown with a phrase match type.

So What Does &Marketing Think of This Change?

This will definitely have an impact on how we structure our keywords and accounts, but overall, we are looking forward to the change! While there may be an adjustment period, we are here for it and rolling with the updates. Google is an always-changing goliath, and a successful one at that. Their goal is to deliver relevant search results and ads to their users. If they don’t provide that, people won’t want to use their site or pay for their advertising, and they will lose money.

After this update, Google’s direction is crystal clear. Google is focusing on user intent and website experience. How can we tell?

Here are a few of Google’s biggest and most recent moves:

  1. GA4: the new Google Analytics Property that focuses almost entirely on user engagement on a website.
  2. Removing a large volume of search query visibility, making it more difficult to see what queries were triggering the ads and keywords.
  3. Using the user’s page experience as a stronger part of their ranking algorithms.

While some advertisers are frustrated by this steady loss of granular control, &Marketing is looking forward to helping our clients better understand their customer’s search intent and website performance, which will avoid any negative repercussions with this ever-changing Google Ads landscape.

This may all make you wonder, is it possible that you’re been wasting money on ad spend this entire time? Find out with our no-obligation and free Paid Search Inefficiencies Audit and find out where you’re wasting your ad spend.

About &Marketing

&Marketing provides the robust outsourced marketing department growing companies need without the high overhead costs of big agencies or full-time employees. Our variable model empowers businesses to reach their growth goals through access to the guidance and expertise of senior level strategists and a flexible execution team.