Explore what RoAS is and its value as a metric for determining the cost-effectiveness and performance of an ad campaign. As Fab On Go, we offer Amazon advertising support as one of our core services.
Advertising is both creative and analytical. Creativity requires out-of-the-box thinking whereas the analytical part gauges the effectiveness of a campaign. There is a Return on Ad Spend(RoAS) that both Amazon sellers and Amazon vendors can calculate against a campaign’s ad spend to see if their advertising strategy is working and driving income.
Let’s understand it in detail.
What is Amazon RoAS?
ROAS is a metric that allows sellers to calculate the amount of income or loss for every dollar they invest. It helps them assess the performance of a particular ad campaign or even a keyword. It provides an excellent benchmark for retailers to figure out what’s working and how to improve their advertising strategy for the future.
Why is RoAS important?
Investing in Amazon PPC ad campaigns is a great way to boost business. Whether it is increasing brand awareness, traffic, or rankings, these ads can do it all.
But it is not that easy. With a new business or product launch as it can be extremely challenging to decide on the spending amount that will lead to success. Metrics like clicks and impressions indicate the growing traction and rising sales. But they can’t determine if you are earning a profit on your ad spend. That’s where RoAS comes into play.
It helps Amazon sellers find:
- Whether their advertising methods are profitable or not.
- Whether certain marketing techniques and tools can or are already making a difference.
- Whether there’s a way to readjust the marketing budget for increasing revenue without landing the ad spend in a total mess.
How to do Amazon ROAS Calculation?
Amazon RoAS formula involves ad revenue and ad spending. Revenue is measured in terms of total attributed sales. Ad spend is the total expenditure on an advertising campaign.
For example, if a business spends 1000$ on a campaign and it earns 4000$, the ROAS is 4. There was an earning of 4$ per dollar spent on advertising that product.
Is there a good RoAS on Amazon?
Every business has to make its own decision for its profit target. Different businesses have different benchmarks which depend on their calculation of profit margin. The average Amazon RoAS of 3x or 4x may work well for someone else and not you. Why? Because of the difference in your industry, strategies, and goals. Generally, RoAS of around 6x can be a good target at the beginning but it all depends on the context of your campaign. In general, sellers benefit from a high RoAS. But this is debatable.
Is High RoAS always a Sign of Success?
Not really. Setting a high RoAS target for a higher margin product can be good because of its lower conversion rate. Low RoAS offers greater visibility for products that helps enhance brand awareness. It also influences a high chance of return on investment, and ultimately, helps command a niche.
How to Find Your RoAS Balance?
You neither want to spend very less on advertising and not receive enough visibility nor spend excessively and decrease your profit margin. Experienced Amazon sellers use different target RoAS for different products.
Where to Find Your RoAS?
- Go to the Amazon Advertising platform and sign in.
- Click on the “Sponsored ads” tab on the left side. A dashboard will open that shows totals from all your sponsored ads at the top, including the average RoAS for all ad campaigns.
Final Thoughts
Now that you have the basic insights into Amazon RoAS and how it can help businesses run profitably, we hope you’ll calculate and balance it for your specific business situation. Fab On Go is one of the oldest agencies specializing in everything e-commerce and Amazon. Right from creating an advertising strategy to taking care of optimization and marketing support, we do everything to help you.
