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The ROAS is actually the Return on the Ad earned in terms of the dollar amount. It can be a clear estimation of what a brand is earning against the amount it is investing in its advertisement and marketing efforts. Actually, companies make the estimation simple and turn it into a ratio like 1:3, or 1:4. It means the company is earning 3 or 4 dollars against each 1 dollar spent on the advertisement. For making our estimation simple and fast we can take online help like the ROAS calculator online. Calculating ROAS is essential for a brand to determine whether it is spending in the right direction and whether the consumers are turning toward its brand website or advertisement. ROAS finance is a key indicator to reflecting your eCommerce website attracting clients.
The Formula of the ROAS
The simple formula for calculating the ROAS is as follows:
ROAS = (Revenue attributable the Ads / Cost of Ads) x 100
Revenue attributable to the Ads= It is the revenues a brand gets or generates due to its advertisement. It is reflected in terms of the ratio against the total spending of a brand
Cost of Ads = It is the cost a brand spends on the advertisement, it can be your cost on PPC (Pay per click) or making and developing a website. Your SEO (Search Engine Optimization) cost also falls in this paradigm. The digital companies’ ROAS ratio should be around 1:8. The ROAS calculator by calculator-online.net reflects the digital common is ROAS ratio is higher as compared to the conventional measurement.
Example of ROAS
Consider a brand that has invested around $ 2000 in ads like PPC or SEO efforts or developing a website. It is gathering around $ 12000 in return. Then find the ROAS measurement for that practically brand.
The simple measurements of the ROAS are:
Given:
Revenue attributable by Ads = $ 12000
It is the actual revenue a brand is gathering on a monthly basis or per year. A brand can select the time period for ROAS finance.
Cost invested on Ads = $ 2000
It is the cost invested in the advertisement, this cost may be PPC, SMM efforts etc in the digital marketing efforts.
Solution:
The formula of the ROAS:
ROAS = (Revenue attributable the Ads / Cost of Ads) x 100
Putting the values in the formula:
ROAS = ($ 12000 /$ 2000) x 100
ROAS calculation = (6) x 100
ROAS calculation = 600 %
The Return or Investment = $ 10000
You can utilize the ROAS Calculator for making the measurement of the ROAS. It can be difficult when you have to deal with various expenses and the cost.
Why do we Measure the ROAS?
The brands usually measure the ROAS due to the following reasons:
- They check the Brand popularity in the target market
- To find their UNIQUE SELLING PROPOSITION (USP) is accepted by the target market.
- The conversion rate, how many clients are visiting the website, and how many of them actually purchase the product or the service
- To analyze the pitfalls in their product and the service
- To find the customer’s satisfaction with your product and the services by the following formula:
Customers satisfaction=[Customers -perceived values/Total cost paid]
- To do the SWOT analysis, the SWOT (Strengths, Weakness, Opportunities, Threats) in a marketplace.
- To improve our already ongoing advertisement campaign, what we need to do to improve our profitability.
Conclusion
The ROAS measurement is essential to determine brand performance in the respective field. The brand should try to take online help like the ROAS calculator online to settle their financial entries in the ledger.
Expert in legal marketing. Head of marketing agency MAVR.
Business degree “Master of Business Administration” (MBA).