The success of your return of ad spend can be attributed to several components, including those that are part of your advertising accounts as well as your eCommerce business as a whole.
I will explain the business components that impact your Return-on-Ad-Spend, how to evaluate if that return is good for your business, and tactics to improve your sponsored advertisements to help boost your company.
4 Strategies to Support Your ROAS in the Long-term
It is imperative to have an in-depth plan with constant revisions to boost the ROAS of your ad account, but this does not necessarily determine the success or failure of your eCommerce business. Variations in contest and cyclicality can have an impact on the amount of money you spend on ads and the success rate of conversions. Don’t let these changes have you swinging between abundance and scarcity.
1. Use Email Marketing to Your Advantage
Emails today equal revenue tomorrow. Therefore, utilizing email marketing is one of the best approaches to optimize your return on ad spend.
Pop-up forms on your site devoted to collecting emails can increase the number of people on your mailing list by as much as 5 to 15%. Being signed up by customers does not mean an influx of cash. You still have to put out effective email communications, but adding subscribers does help offset your ad costs by:
- Adding new visitors to a list that you own
- Growing a channel that doesn’t make you pay per click or open
- Having a channel where you can communicate with customers long-term
An email marketing effort can be especially beneficial for your return on ad spend during the pre-holiday period. eCommerce retailers made up around 27% of their total revenue during Q4 as a result of email marketing, and 60% of sales during the 2019 Cyber Weekend can be linked to customers who interacted with a brand’s email during the 3rd quarter.
While we don’t have time to get into detail on email marketing, here are a few places you can get started:
- Welcome Series: Don’t let a new subscriber hear crickets. Introduce yourself. Why do you exist? Why should they love your brand? Throw in a small discount if you can.
- Cart Abandonment Series: People abandon carts, but it doesn’t have to stay that way. Create an automated sequence to follow up with cart abandoners. Make sure they don’t have any objections and help them complete their purchase.
- Customer Winback: Has it been a month or even a few months since someone bought? Let them know if something they’ve had their eye on is back in stock or if you’ve added an exciting new product. Make the effort to stay in touch, and offer something valuable.
Not all people are ready to make a purchase from you immediately. Basically, very few people do it, however, with email marketing, your clientele can become much more acquainted with your business across a lengthier duration. Some customers will aim to get lower prices, while others simply desire to be more familiar with you and your business. Even if it cannot be accomplished quickly, it is a wise decision to slowly convert 5-15% of the clicks you get into customers in the long run so that your return-on-ad-spend (ROAS) is maximized.
2. Offset Your Advertising Costs with SEO
Paid ad campaigns give you the advantage of speed and control, however, some of the associated advertising expenses can be reduced by investing in SEO. For instance, if you spend $4 for every click on a given keyword, you can potentially reduce your ad expenditure by $400 each month if you have a high ranking organically, thus enabling you to receive 100 visits every thirty days. You can also utilize it to generate even greater development.
Two avenues to kick off SEO is with reliable technical SEO and a content technique that informs and pleases your intended customers.
Does the wording of the title tags on your product pages meet the terms people are using when looking for your products for technical SEO purposes? Are they clear and descriptive?
Does the product page contain detailed and individualized information that is sufficient to help a potential buyer make their choice? It is worth giving some thought to this topic since your product pages are essentially carrying out the same task as a sales assistant in a physical store.
Apart from your product pages, it is important that your content strategy covers topics that will be of interest to your customers. For instance, do you offer any information about how to operate a kite if your business is selling them? Advanced kite-flying tutorials? Although the example might be a bit obvious, it is worth noting that if your customers are only given a transactional experience, they will likely seek out another brand that caters better to their feelings.
3. Improve Your Conversion Rates with Chatbots
If your business has ever had both an online store and a physical shop, you may have observed that the average purchase size in the physical store is larger than on the website. It’s not strange to have several salespeople in your store that can help customers locate a product, compare various versions of it, and explain the advantages of each. What if you could create the experience of having a shop attendant through the utilization of online components, instead of a single landing page or product page?
Chatbots can be used to assist customers in discovering an item they require, obtaining further information about your company, and responding to straightforward queries. Customers stated that site navigation was one of the main sources of their disappointment, which could seem to be overkill when it comes to optimizing conversion rate.
Continual testing and adjustments can gradually improve the efficiency of your website, and an automatic chatbot may be the answer to any gaps in your customer support needs, without sacrificing a great deal of money.
4. Build Subscriptions, Referrals, and Loyalty into Your Offerings
The major point to take away from this is that obtaining earnings is greater when focusing on satisfying regular buyers rather than attempting to increases sales by gaining as many customers as possible. Converse regarding some methods that you can use to make your offers more interesting.
Purchasing a subscription can provide a more dependable flow of money from current clients. If you don’t offer items such as food and supplements, do not disregard this section just yet. You do not need to offer a product or service that is used up in order to create a subscription.
A clothing store, known as Cuts, initiated an initiative that gives customers the chance to get two shirts of their selection each month with a maximum savings of 36%. Not all people will register, but the individuals who are most devoted to the company will. And this predictable revenue will add up over time.
Get creative. Reward your customers for liking you.
Utilizing referrals from your current customers is a great way to maximize your customer base. People who adore your business are the most likely to tell their associates about it, and what impact does this have? Attract more high-value customers. Provide an audience with an enjoyable experience that is worth their time.
Think about dividing the amount customarily paid by the client in half and give each party their due once the sale is made. Since this form of investment is provided when you buy it, it’s almost secure from ROAS that unexpectedly drop.
If you are prepared to give extra effort, loyalty schemes will make returning patrons even more enthusiastic about buying from you. Almost all customers surveyed indicated that loyalty programs encouraged them to stay with certain brands and two thirds of them said that they would alter their buying habits in order to gain the greatest advantages.
Members of the loyalty program at Rhone are able to get complimentary two-day delivery on all orders, receive bonus points, and take advantage of other advantages.
For now, the program is free to join.
Loyalty programs aren’t one-size-fits-all. Track how customers use your loyalty program in the same way you track other marketing efforts, to ensure they are gaining benefits from it. If there is a decline in the number of customers returning to buy from you, you’ll be more vulnerable to changes in the return on ad spend in the short-term.
Using Your ROAS
I am hoping that I have now persuaded you to make use of return on advertisement spend (ROAS) in order to assess and improve your paid search initiatives. The question now is, how? To answer that, let’s work through another example.
For this situation, suppose you manage a whale-spotting enterprise. You can only take one individual out on your small vessel since it’s a secondary enterprise. You charge $150 per hour-long voyage and do about 20 of them per month while making a 50 percent profit, so this is a good job.
Despite countless passengers urging you to make this a full-time occupation, you eventually make the decision to go ahead with it. You rent a workspace, get a temporary helper, and find that your costs total around $2,000 a month, which is more than you had anticipated.
All of sudden, you are losing $500 a month. You need to sell more tickets, fast!
To attract more customers, you initiate paid search marketing strategies. How can you determine if a campaign, advertisement grouping, advertisement, or keyword is effective? Let us investigate how ROAS can be employed to answer that issue.
1x return on ad spend
Let’s say you charge $150 a ticket. For each sale that results in $150 in expense, it would be prudent to ensure you are making at least the same amount of money. Unfortunately, that’s not how it works. Every time a journey sets you back $75 for fuel and vehicle wear, buying something just once does not cover the expense and puts you further into debt.
You still need to be able to recoup the $500 that you spend each month, so any campaign component which does not generate at least the same return of investment should be improved or stopped entirely.
2x return on ad spend
What would happen if a 1x return on ad spend wasn’t satisfactory, would a 2x return on ad spend be good enough? If you use $75 for marketing purposes, will you be able to break even? Sadly, still not the case. If you don’t make a profit on every journey, you will not accumulate any wealth. It is impossible to settle the $500 debt you are in.
The focus of marketing a business is to battle drawbacks and earn profits, so any aspect of a campaign with a return on ad spend of two times should be looked at more closely. I would focus mainly on the 1x elements first, but once they are running smoothly, you should pay attention to the 2x elements.
3x return on ad spend
When a return on ad spend is three times as much, it becomes much better understood. If you are able to increase your sales by over 20 and achieve a return on advertising spend of 3 times, you will be financial successful!
At a 3x return on ad spend, you won’t make a large profit, but you will be earning money. It is suggested that you should strive to achieve a ROAS (Return on Advertising Spend) of at least three times in your marketing initiatives.
4x return on ad spend
Once you reach a return on ad spend of 4x, the numbers usually begin to make sense. At this rate of profit, you only have to make 14 sales in order to pay for all your fixed and variable costs and start making a profit.
Having each part of your paid search advertising endeavors at a high level is a worthwhile aim, however it is probably somewhat unreasonable. If your campaign yields a return on ad spend of 4 times, you should be in good shape.
5x+ return on ad spend
With an ROAS of 5x or greater, it appears that your paid search campaigns are running successfully enough that you can begin expanding your organization.
After about a dozen sales, you should have enough income to purchase a bigger vessel and accommodate more customers. Both of these things will increase your profitability.
In an ideal situation, the performance of all components of your campaigns would be extraordinary, but if your campaigns are achieving 5 times the return on investment or higher, then everything is probably fine.
Using ROAS
This is a distinct situation, but it shows a common guideline: Aim to get a 4X return of expenditure in your sponsored search campaigns and constituent components.
Any campaign contribution yielding a return on investment of less than three times should likely be modified. The significance of improving any particular component will be based on what it is costing you, but usually you must have a minimum of a 3x return on ad spend in order to be profitable.
Naturally, this regulation doesn’t match up completely with “branding” efforts, yet the majority of campaigns launched through paid search don’t come under such a heading. Paid search marketing commonly takes a lot of money and focuses on the last part of the sales cycle. Therefore, if your return on ad spend isn’t at minimum four times what you spent, your marketing may not be doing well.
When thinking about particular parts of your campaigns, Return on Ad Spend is a helpful way to categorize. It is essential you assess a sufficient number of clicks (min. 100) for any promotional program you contemplate examining, but when you have ample data, this technique can be utilized to swiftly discover which parts of the campaign have to be sharpened, excluded, or increased.
Conclusion
ROAS is commonly thought of as a measurement of success in e-commerce, but it is actually one of the most beneficial and underutilized paid search metrics available. It certainly does require an additional effort to have tracking implemented, however, the data that is acquired is invaluable.
Once you have ROAS tracking up and running, you need to utilize it to enhance your campaigns. Here, the key is to understand how the ROAS data reveals how well the aspects of your campaign fared in the end, and with that understanding, figure out what must be changed. By the end of this post, you should have a strong understanding of how to utilize and understand the information you get from ROAS.
The particular aspirations you have might be different, but by employing ROAS as a standard for your ad campaigns, you will be able to make changes that are the most impactful – which is, ultimately, to make profits.
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