How to Use ROAS Calculation to Measure PPC Campaigns
If your marketing department is running pay-per-click campaigns, ROAS, or return on ad spend, is the most common way to measure the efficiency of your efforts. This vital metric measures whether or not your advertisements are reaching the right audience, but the value doesn’t necessarily have to come from realized profits.
The value of the return can be determined in several different ways, including through conversions, impressions, and even search ranking and domain authority. For PPC teams, a client’s objective dictates the focus of their marketing campaign, fully dependent on the type of business and overall scale they’re hoping to achieve. In this blog, we’ll investigate why ROAS is the almighty metric that’s best for evaluating the significant “events” or actions users are taking on a brand’s website.
What’s the Role of PPC in Marketing?
If one thing is universally accepted in digital marketing, it’s that Google has insurmountable authority within the search engine space and isn’t going anywhere. This means that to stay relevant, businesses need to offer instant gratification and understand user intent. Only then can PPC campaigns appropriately target their preferred audiences. No matter if it’s high-volume searches or niche industry keywords, each specific grouping has potential.
When marketing teams work with a company that has a strong reputation or multiple customer pools, resources can be spread across different channels depending on the focus of the campaign. This allows for enhanced targeting and segmentation, resulting in a more carefully tailored set of ads, all with their own distinctly measured objectives. This helps create higher visibility for the brand while also creating awareness around which sectors of their business are seeing quantifiable results from these strategies.
The end goal is to be able to track the measurable outcomes of these campaigns, whether the conversions you’re focusing on are site visits, leads, or sales. The more eyes of customers a brand becomes exposed to, the better the familiarity people will become with their products or services, hopefully leading to increased engagement with the brand in general.
What Makes a Quality PPC Campaign
There are a few key components that go into creating a quality pay-per-click campaign. Here are the main factors to consider.
Decide Which Goals and Conversions Matter
All PPC campaigns operate around a predetermined objective, so it’s important to know a company’s purpose for running the ads. It could be for lead generation, business-to-business, direct-to-consumer, or other e-commerce marketing, but there will be a particular metric you’ll want to monitor under each of those umbrellas.
It’s also worth noting that you don’t need to focus on a singular goal. While your objective may be to sell products, it can be equally valuable to gather data from first-time site visitors and new email sign-ups. These are quantifiable measures you can track once you get in front of the right eyes.
Understanding Audience Segments
Almost nothing is more valuable to a marketing effort than the audience data of customers, site visitors, and adjacent pools. This helps a company learn who its most viable target markets are. Once these individuals are grouped together, numerous services provide accompanying data to show how to deliver applicable campaigns to effectively reach these populations. Whether it’s by location, industry, interest, or a combination of all three, these segments can be managed to be more precise and maximize budgets.
Using Quality Ad Copy and Creatives
With everything becoming more tailored to individual needs and interests, personal advertising has quickly followed suit. Interacting with creative ads that not only recognize your particular query or previous brand affiliation but also cater to your unique persona is no coincidence — they’re actually created based on the various audience segments we just discussed prior. Implementing an assortment of creatives allows companies to use different strategies to appeal to various audiences in order to market a variety of products or services to different groups, which can help improve the strength of a PPC campaign.
What is ROAS Measuring?
In simple terms, ROAS constitutes the amount of revenue earned per dollar spent on the cumulation of ad campaigns a business runs. But the way this return is calculated isn’t always a case of literal profits. Depending on a business’s marketing goals, there are different ways in which PPC campaigns can generate the attention they’re hoping for.
Bidding and Client Target Metric
The easiest way to maintain influence across your targeted demographic is your budget, which ultimately controls your bidding power. Local businesses may have to spend less, but outspending your regional competitor may be necessary if you’re in a competitive market. The more budget a marketing team can acquire, the more freedom they will have to experiment and discover potentially unrealized data that may hold significant value.
If you’re looking to secure leads, you’ll want to understand the quality of each lead in comparison to the cost per acquisition. This would be different than e-commerce, which looks at the value of an order in relation to the number of sales in a given period. In addition to ROAS, other metrics like CPA and LTV (lifetime value) give companies an idea of how their efforts are going.
Calculating Conversion Value Over Cost
A marketing campaign also needs to consider the value of each conversion in relation to the amount it costs to deliver each PPC ad to the relevant segments. While some types of conversions may be easier to obtain than others, there’s no doubt that others can carry much more value if they encourage things like recurring memberships or quoted services for multiple locations or projects. In most cases, there will be a formula that can be derived to determine the estimated value of each conversion.
How to Improve ROAS
Here are a few of the most attainable ways to improve ROAS for your PPC campaigns.
- Target ROAS as a Bidding Strategy – Many ad platforms offer ROAS as a campaign focus when setting your bidding strategy, allowing it to aim for profitability above all
- Maximize Conversion Value – Use structured audiences to find high-value conversions and reinvest in other potential valuable customers.
- Focus on Impressions – ROAS doesn’t always have to concern revenue, as sometimes brand visibility is just as important a goal for some businesses. When you get in front of the right users, your budget goes much further.
- Establish CPA – Set your target cost per acquisition and stick to it. Don’t exceed your spending limits on unworthy users.
- Earn Budget When You Can – With the documented success of previous PPC campaigns, clients will be more likely to give you more budget to work with, allowing you to reach more users and gain additional data insights.
Why PPC Relies on ROAS to Determine Effectivity
ROAS is a significant indicator across the vast range of PPC campaign types, but it’s particularly indicative in e-commerce. It’s a cut-and-dry reflection of dollars spent on ads and the amount of product sold based on those particular generated leads. However, it still is a worthy indicator of understanding a company’s marketing efficiency and profitability. While some companies benefit from PPC as a marketing strategy, there are others who forego it for their own personal reasons.
Ultimately, PPC works in unison with other marketing channels, and many of these audiences and insights can be used across multiple teams to help gather more accurate and useful data. With these resources, a PPC team can better refine and improve processes in correlation with the overarching business strategy. When sustainable ROAS is achieved and scalability becomes inevitable, the PPC team has done its job in achieving the appropriate return necessary for strategic expansion.
If your company is looking for assistance in bolstering their PPC efforts, contact Lamark Media today to learn more about improving your overall marketing performance efforts.