Behind each ad there is a businessman who wants to sell his product as profitable as possible. The profit does not, however, include only the product sales alone, but also the related expenses.
One of the expenses is also advertisement that needs to be maintained. If you do not have an overview of how much you invest in your ad and how much you actually get back, you may easily end up failing to profit. Nobody wants this scenario, right?
Cost of sales revenue ratio (CoS) is one of the most convenient manners to measure the efficiency of your ad.
What actually is CoS?
Cost of sales is the percentage of the cost value, total ad cost, divided by the total value of acquired conversions. Simply put, it is is a metric telling us how much per cent of our profit are costs for the ad. In our case this percentage helps us to express the financial efficiency of the PPC product campaign.
If your CoS is 10% at 100€ product, it means that you have invested 10€ to its sales.
CoS and your campaign
Campaigns can be measured in various ways – cost-per-click rate, clickthrough rate, cost per conversion… None of these, however, tells us more about the profits. And so, you don´t know, if this type of advertising is actually paying off.
One of the effective options is calculating the return of investments (ROI), which is actually the closest option to CoS. The problem of ROI is that it does not just show up. It requires a lot of calculations and data. CoS, in comparison, is an easier metric that tells you much more.
%CoS shows you, if your ad is worth it. If this percentage is too high, your costs to run the ad are useless. In that case you should consider optimizing it. If the optimization does not help, the best solution is to move on the advertising to another platform.
Read more on how to optimize your PPC campaign in case it does not generate leads.