How to improve your ROAS

Today’s guest post is written by Max Sinclair.

Max is the founder of Snowball Creations (a paid advertising agency) and Forzeit (a complete time management system).

He is based in London, UK.

5 Proven Ways to Boost Ad Profitability

When it comes to paid advertising, there are several metrics that marketers need to assess to determine whether a campaign is truly profitable. This is where Return On Ad Spend (ROAS) comes in.

When analysed correctly, it shows whether an ad campaign is generating a positive or negative return. High click-through rates and engagement might make an ad seem successful, but they hold little value if those interactions don’t lead to visitors buying.

This article will take a deeper look at ROAS, what it is, how it works and some strategies you can implement to improve your ad profitability. Let’s jump in and get that ROAS supercharged. (To learn more about paid advertising, check out this introductory post where we take a deep dive into paid media management.)

What is ROAS and why does it matter?

ROAS measures the revenue generated compared to the amount spent on advertising. Simply put, it tells you how much revenue you earn for every dollar invested.

Calculating ROAS is rather straightforward and just comes down to basic math. All you need to do is divide the total revenue generated by the total amount spent on ads. For instance, if you spent $10,000 on an ad and generated $40,000 in revenue, your ROAS would be 4.0 or 400% if expressed as a percentage.

ROAS Calculation: Total Revenue / Total Ad Spent

Example: $40,000 / $10,000 = 4.0 ROAS

To express this as a percentage, you multiply it by 100 (4.0 x 100 = 400%)

Essentially, this means every dollar spent returns four dollars. While the goal is to have a strong ROAS, what counts as a “good” varies depending on industry, competition and the type of business.

Some businesses see huge returns — we’ve worked with a client who’s hit a 46x ROAS, which is an incredible feat. However, this level of return isn’t always realistic for everyone. The key is to focus on optimising your ads so you’re getting the most bang for your buck based on your specific industry and goals.

Understanding your ROAS allows you to make smart decisions about where to allocate budget, optimise creatives and fine-tune targeting strategies to ensure your campaigns are generating the best return possible.

This brings us to the ultimate question — how do you go about boosting your ROAS? Here are 5 strategies to help you do just that.

1. Targeting the right audience

Ensuring that you are targeting the right users is one of the best ways to improve your ROAS. Even the best ad creative and landing page falls flat if you’re targeting the wrong people with your ads.

Imagine running a steakhouse and your ads are showing up in front of vegans. No matter how mouth-watering your creative is, the chances of conversion are still slim to none. This is why clearly defining your target audience is so crucial.

The best place to start is to analyse your ideal client. Figure out their demographics, interests, their pain points and where they spend their time online.

This will provide you with a solid framework of who you need to target, which marketing channels you should invest in and how to craft the right message. The more precise your targeting, the more likely you are to reach people who are genuinely interested in your offer.

Here’s a quick look at different ways you can improve your targeting:

• Segmentation: This involves dividing your audience into smaller more specific groups based on demographics, purchase behaviour or interests.
• Lookalike audiences: Use data from your existing customers to create lookalike audiences. These users are more likely to have similar interests and behaviours, making them a better match for your offers.
• Geo-Targeting: Customise your ads based on the geographic location of your audience. This is especially useful if you’re a local business or running location-specific promotions.
• Interest targeting: Focus your ads on people who have expressed an interest in topics or behaviours that align with your business.
• Retargeting: Retargeting campaigns target users who have engaged previously with your brand but did not convert.

2. Investing in high-quality ad creative and copy

While targeting the right audience is incredibly important, you want the message they see to be effective at pulling them in. Even if your ad reaches the perfect audience, it’s useless if it fades into the background, drowned out by the endless noise of the internet.

Your creative and copy should have a kind of ‘wow’ factor that makes people stop scrolling and say, “Take my money!” Experiment with different visual elements, copy and calls to action until you find what works with your audience.

We’ve seen firsthand how powerful creative can completely transform results. Take one of our clients, for example, after teaming up with our creative studio, their cost per lead went from £293 all the way down to just £0.90!

That is an absolutely amazing return just from implementing effective ad creative. If you are interested in seeing how we can help you achieve similar results, check out the Snowball Studios page.

The key to effective ad creative is paved with continuous refinement where you analyze performance, tweak visuals and optimise your message to maximise your chance of conversions. The more you test and discover what works, the stronger your ads will become, ultimately leading to a higher ROAS.

3. Don’t disregard Customer Lifetime Value

When it comes to ROAS, many businesses get caught up focusing only on immediate returns. Looking at other factors such as customer lifetime value can provide a more comprehensive view of long-term success.

CLV tracks the total revenue a customer is likely to bring in throughout their relationship with a business. Thus, a business with a larger CLV might be in a position where it makes sense to allocate more capital, even if that results in an initial lower ROAS.

For instance, a subscription-based company might spend more on ads if they know customers will continue paying over the long term. While the immediate ROAS is lower, the future revenue generated from that customer makes it a profitable investment.

Considering CLV helps you assess the true value of your campaigns and make smarter decisions on your ad spend. If your competitors are looking at the longer-term CLV while you’re solely focusing on just the first purchase, chances are, they’ll outspend you and still have a strong ROAS.

That’s why it’s crucial to factor in the full picture of your ad spend’s return. Platforms like SegMetrics are excellent at helping you measure CLV and optimize long-term profitability, making sure you stay competitive.

4. Enhancing your landing page experience

One major paid ad mistake marketers make is sending ad traffic to a landing page that isn’t optimised for conversions. While it might seem harmless to send visitors to a generic page, an unfocused landing page can significantly impact your conversion rate.

Generic landing pages create friction points that distract or annoy visitors, often causing them to leave immediately. This is exactly what you want to avoid. Here are a few factors that make a great landing page:

• Landing page relevance: Your landing page needs to match what your ad promised. Imagine clicking on an ad for a free trial, only to land on a page that talks about pricing instead. Now you’re stuck hunting for the trial — frustrating, right? Most people won’t bother and will just leave. Keep it simple: if your ad promotes a free trial, make sure the landing page delivers exactly that.

• Mobile-friendly and load speed: If your landing page doesn’t load fast enough or display correctly on visitors’ devices, they’ll likely leave. According to Google, the likelihood of a visitor bouncing increases by 32% if the page load speed goes from one second to three. Make sure your landing page is mobile-friendly and loads quickly — you don’t want to lose prospects to a competitor just because their site is faster.

• Keep your landing page focused: Minimise distractions by using a clean design with only essential elements. Include a strong CTA and trust signals like testimonials, but avoid anything that might pull users away from converting.

One of the best ways to test and refine these elements is through Google Experiments. Running A/B tests lets you compare different versions of your landing page and identify which elements perform best for your audience. This ensures you’re always optimizing for the highest conversions.

5. Ad spend optimization without sacrificing performance

The best way to improve your ROAS is to spend less on your ads — but this is not as easy as it sounds. The real challenge is cutting costs without hurting performance. Here’s how you can strike the perfect balance:

• Refine your audience targeting: As mentioned, the more precise you are in defining your audience, the higher your chances of reaching users genuinely interested in your product.
• Optimise bidding strategies: Test various bidding strategies to see which ones work best for your business. Automated strategies can help optimise bids in real-time, while manual bidding allows more control over costs.
• Pause or scrap poor-performing campaigns: Cut underperforming ads and focus on the ones that are driving the best results.
• Test, test and test some more: Continuously experiment with different creatives, copy and targeting to find what works best and reduces costs. Keep a close eye on your analytics and A/B test various elements to understand what drives the most effective results and boosts performance.
• Ad scheduling: Focus on only running ads during the times that your audience is most likely to engage.
• Improve your Quality Score: Quality Score is a metric Google uses to measure how relevant and effective your ads are. A higher score means lower costs and better placement. Focus on improving your score to help you increase your ROAS.

Skyrocket your ROAS

Skyrocketing your ROAS doesn’t need to be a wild rollercoaster ride. With the right strategies, it’s more like a smooth jet takeoff. With a holistic approach, you can optimise every aspect of your campaign for maximum results. This could include refining your targeting, adjusting your bidding strategies, optimising your landing page, prioritising CLV and testing different creatives.

By doing so, you can make your advertising spend work more efficiently, helping your campaigns to drive better results. Struggling to get the most out of your paid campaigns? Contact Snowball Creations and discover how we can help you boost your ad performance and get better returns.

Thanks again to Max and Snowball Creations for lending their insight on how to optimize Google ads performance. Be sure to check out Snowball Creations and Max Sinclair.

For more on SegMetrics’ advanced ad attribution, check out how SegMetrics delivers the most accurate Google Ad data.