Correctly Calculating ROI & ROAS for Your Digital Campaigns

ROI & ROAS are common terms used in the digital marketing industry. They represent very useful metrics that you can use to determine the success of a marketing campaign. In this blog, Check out these tips for correctly calculating ROI & ROAS for your digital campaigns and what can influence the results.

ROI
ROI is Return on Investment. It is the profit you make after removing the product and marketing costs. For example, if you made $1000 from selling your products and the total cost of your products plus the marketing cost of your products was $500, then your ROI would be (1000 – 500)/500 *100, which is 100% ROI.

Here is the formula: ROI = (Revenue – Cost of products sold) / Cost of products sold *100.

ROAS
ROAS is Return on Ad Spend. It is the revenue earned for every penny you spend. For example, if you earned $1000 in revenue and spent $500 in advertising, your ROAS would be 2:1. It means you made twice the amount you spent.

Here is the formula: ROAS = Revenue/ Cost.

Tips For Calculating ROI & ROAS
To calculate the ROI & ROAS correctly, here are a few tips.

1. Conversion Tracking – Use conversion pixels placed on the website to track user activity. Tools like Google Tag Manager, Google Analytics, and Facebook Pixels can make sure the tags are installed correctly. This will help you track the sales, purchases, clicks, etc., that happen on your website back to the digital campaigns.

2. Set Your Goal – The campaign goal could be to bring awareness to the audience, generate form fills on the website, or make the customer buy a product on the website. Once that is decided, you can build digital campaigns to achieve that goal.

3. Have A Bid Strategy – How you bid for your ad to be shown plays an essential role in your strategy. Usually, the campaign is set to Manual Bidding when it first goes live, and once the campaign starts getting conversions based on its campaign goals, the bid strategy is then updated to Automated Bidding.

4. Understand Your Attribution Model – Your chosen attribution model helps you understand how the conversions are being attributed. It could be a first-click model, a last-click model, or a data-driven model. For example, in a first-click model, if a customer first watches your ad on Google and then comes back later and converts via clicking an ad on Facebook, the conversion is attributed to Google. In the last-click model, it will be attributed to Facebook. In a data-driven model, it will be attributed (by the system) based on the customer’s journey through the various channels.

5. Assign Conversion Values – If one conversion (like a “form submit”) is of greater value to you than the other conversion (like a phone number click), then assign a higher or lower conversion value to each conversion. This directs the campaign to focus more on the higher-value conversions than the others.

 Test For Success
Beyond the paid campaigns, the website/landing page experience can play a big role in getting a conversion. The smoother and easier the process is for the customer, the higher the website’s conversion rate. Consider A/B testing page layouts, page copy, or graphical elements to optimize the visitor’s experience and drive conversions.

Once you know which campaigns generate the most valuable conversions for an acceptable cost per acquisition, you can fine-tune the digital campaigns to generate maximum ROI and ROAS. Paid campaigns are rarely “set it and forget it.” At lodestar marketing group, we monitor and optimize campaigns throughout the duration. Our extensive digital marketing experience makes a difference.

As a Google Premier Partner and Microsoft Advertising Certified Professional, Lodestar Marketing Group can help you achieve maximum ROI and ROAS, generate leads, and increase sales via paid media campaigns. Reach out to us today to learn more about our digital marketing services.