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.

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.

Big data is hard to collect, organize, and view at scale, but you know you need it to compete in today’s growing digital landscape.The way you’re analyzing data now is likely a time-eating process that hardly ever results in quality business insights. It’s difficult to move beyond massive Excel spreadsheets, but it’s also daunting to invest in sophisticated tools that aggregate data but don’t integrate with one another. Telling a story through data pulled this way that can actually inform your business decisions is nearly impossible.

In order to remain digitally relevant, you must implement a solid business intelligence strategy that simplifies the ability to make business decisions from loads of data. In this blog, we discuss three ways business intelligence (BI) can form your business strategy for immediate success.

What is a Business Intelligence Strategy?

A business intelligence strategy is the process of developing and executing a BI system that will help identify opportunities and weaknesses that give your business a roadmap for achieving business level goals.

The 3 Benefits of Implementing a BI Strategy

A BI strategy will help you make informed strategic decisions, save time and money, and gain a competitive edge. Implementing a BI strategy is not an easy task: it requires significant preparation and, potentially, expenses. In the end, though, the rewards (and ROI) will outway the costs. And soon, businesses that don’t BI will experience higher costs long term than those that do. Once the automations and aggregators are set up behind the scenes, you can cut the time it takes to manually pull, align, and analyze data manually by up to 90%.

1) Understand ROI Across the Business

A solidified BI strategy uncovers where your business is maximizing ROI while also identifying the business actions not giving you a return on your investment. It’s difficult to analyze ROI across business campaigns, most often due to unstructured data coming from multiple data sources that do not talk to each other. The information in these disparate systems may be easy to report on in a siloed view; however, a siloed view limits the ability to compare the real impact (or lack thereof) of a specific campaign. By implementing a BI strategy, CEOs and business owners can review data combined from multiple sources and see insights at the business level to fully understand what’s performing and what’s not.

2) Optimize Business Costs

BI can simplify the data collection process, which can reduce your long term costs for gathering data on an ongoing basis. Budgeting and forecasting can also be accomplished through a solid BI strategy. CEOs and business owners can estimate how much they need to spend on certain campaigns in order to achieve their business revenue goals with campaign-specific performance data. Additionally, they can quickly identify where campaigns are blowing through budget without producing results and take immediate action to either stop or reroute budget elsewhere.

Outgoing campaigns are not the only area where you can use BI to optimize your costs. At &Marketing, we use it internally to understand how we are spending our time for each of our clients and identify where we can improve our own execution processes to optimize time and reduce costs.

3) Gain a Competitive Edge

By implementing a business intelligence strategy, you can get visibility into your entire competitive landscape across multiple business lines and channels. Competitor intelligence is often difficult to work into existing analytics, as competitor data does not always match up apples to apples with your own data. If you’re struggling with limited competitor information, BI tools are available that can analyze competitor campaigns by identifying where they are doing better and what areas you can improve and overtake them.

How to Create a Business Intelligence Strategy

Creating and executing a business intelligence strategy is not an easy task. It requires extensive planning and is not as easy as simply choosing a platform. Here’s what to know:

1) Identify Your Business Goals

The most important part of creating a business intelligence strategy is to define KPIs for your business. Without KPIs, you will develop a strategy that does not effectively answer the questions you need to answer.

2) Define Success

After defining your KPIs, understand the people, processes and technologies you need in order to achieve success. This step is important in getting everyone on the same page before getting too far down the road.

3) Aggregate and Align Your Data Sources

This is the most time-consuming step of creating a business intelligence strategy. You must gather all of the data and determine common connectors so it all communicates. Once you have aligned data sources, be sure to visualize the data in a way that CEOs and business leaders are able to easily understand.

4) Develop Data Visualization Dashboards to Easily Mine and Find Your Business Insights

This is the most exciting part of creating a business intelligence strategy and a critical step in taking data all the way from insights to action. Our team recommends reviewing data for multiple time frames in order to best understand your business. For example, compare months, quarters, and years to uncover trends. September might show higher numbers than October, but you might be up for the quarter or the previous year’s September.

5) Develop a Roadmap

Using the business insights from above, create a roadmap for success that details your campaigns. Use the roadmap to guide your tactics and serve as a baseline. After starting the campaigns, be sure to monitor results as soon as you have them.

6) Review, Optimize, Rinse, and Repeat

Business intelligence strategies are always evolving, just as new digital tools arrive to market every day and online trends ebb and flow. Be sure to constantly review the market for ways to innovate.

Implementing a BI strategy requires upfront work and expense that your business will need to prepare for ahead of time. Yet, a solidified BI strategy uncovers where your business is maximizing ROI while also identifying the business actions not giving you a return on your investment.

Having trouble with building your BI strategy? Download Our BI eBook to help you pave a roadmap for your own business.

About Paul Ferguson

Marketing Director Paul Ferguson helps clients develop fully integrated marketing solutions that make impressions and drive results. Whether it be design-oriented campaigns or digital market execution, Paul skillfully creates strategies to effectively reach client’s desired audiences.

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.