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How to calculate ROAS

ROAS targeting can be very important for PPC campaigns in Google AdWords. It is the metric, that says you, if you are in profit or in lost.

The goal of this bidding strategy is to maximize revenue from Ads, but to preserve intended cost-benefit ratio. In product ads every conversion can have different conversion value, so determination of a uniform CPA is not possible. It is recommended to put into one campaign only products with the same margin, so there is the same cost-benefit ratio for all products in campaign.

ROAS Formula is: Revenue (total income from advertising) / Cost (total ads spend) = ROAS 

ROAS can be calculated also as percentage: ROAS x 100 = ROAS%

 

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When you would like to know ROAS based on your gross margin, the gormula for minimum recommended ROAS is:      100 / margin = ROAS

If you have margin 20%, you can calculte ROAS this way: 100 / 20 = 5

In this case ROAS in % is 500%

As we see, in case of margin 20% is ROAS 5. So, every invested 1 € have to generate 5-fold turnover. If delivers more, it is a profit, if less –  loss.

 


The goal of target ROAS strategy requires conversion measurement in AdWords and achieving at least 15 conversions in the last 30 days. Better is to use this strategy when more data available – at least 100 conversions in last 30 days. The condition is to not to change campaign settings and campaign should have consistent performance over the last 30 days.

smart-bidding-type-target-roas-calculation-formula

You can now use Target ROAS also in BlueWinston. In part Campaign settings you can set up Smart bidding with target ROAS. If you do not have enough conversions, you should wait some time, when campaign increase its perfomance. When it is not possible to use AI smart bidding ROAS in AdWordse, you can use in BlueWinston target CPA. This value is automatically calculated from price of every product.

 

Formula for minimum recommended ROAS is:      100 / margin = ROAS

 

Click here if you want to learn more about automated bidding types for Google AdWords campaigns.

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By |2018-06-03T11:40:42+00:00May 28th, 2018|Categories: How To Create|0 Comments
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