ROAS? Low ROAS? Here are the reasons and how to fix it //
In order to increase traffic volume, you set up an advertising campaign. After the campaign has been running for a few weeks, you realize that the return on ad investment (ROAS), is not high enough to justify. This means that the revenue generated by your campaign is equal or lower than what you spent. You will have to make a decision about whether you want to stop your campaign or make drastic changes to improve the situation.
Why is your return on advertising spend so low?
Low ROAS lies in the formula. To calculate your return on ad spending , it is necessary to determine the cost of your campaign and the revenue generated. Your returns could be negligible if it was too expensive or did not produce enough revenue.
Let’s assume your cost-per click was $1.96. It would take 25 clicks to convert 4% of your traffic. Each conversion in this case would cost $49. To make your campaign profitable, your average order value (the average amount your customers spend on an order) would need to exceed $49 It should be at least three, four, or even five times this.
There are three metrics that can help you calculate ROAS.
- Your cost-per click
- The conversion rate
- Your average order value
These three metrics can all be used to determine why your ROAS is low.
1. Your cost-per click is too high
Your cost-per-click could rise exponentially if you don’t adhere to online advertising best practices. This can be a problem for your bottom line. It’s simple math: the higher your costs are, the lower your return. Therefore, it makes sense to optimize the cost of your advertising campaign.
To reduce your cost per click, first you need to understand why it is so high. You might be competing for short-tail keywords. You might be bidding too much for the ad position you want. You might have a lower Quality Score than you would like. Once you have identified the problem, it is time to start looking for a solution.
Your Quality Score is a key factor in determining the cost for a Google Ad campaign. It measures the quality of your ads and their relevance to the keywords you are targeting. High Quality scores will reduce your cost-per click and increase impressions. Low Quality Scores can lead to a 400% premium.
You must increase your click-through rate, ad relevancy, and landing page experience to achieve a higher Quality score. These are some of the best ways to start:
- Increase your conversion rate: Write compelling copy that connects with the keyword’s intent. Ad groups that target keywords with commercial intent, such as “buy tennis shoes”, should use commercial copy (e.g. “Buy Now”)
- Speed up your landing page: A visitor’s experience is affected by how fast your site loads. It can be improved by compressing images and multimedia elements, reducing the HTML, CSS and Javascript files and using browser caching. For lightning-fast load speeds, use AMP pages.
- Optimize landing pages for all devices: It goes without saying that responsive web design is essential to ensure every device can be used and offer a better user experience.
- Match your ads to its keywords. Both your ad copy and landing page copy should correspond with the keywords you bid. In the headline, copy, URL, and URL, include the keyword that your ad group is targeting.
2. Your conversion rates are way too low
Advertisers tend to concentrate on maximizing clicks when optimizing an advertising campaign. Advertisers tend to focus on the clicks, and neglect the landing page. This leads to low conversion rates, which advertisers consider “natural”.
If you strive for the average, you will get it. Your conversion rates could be higher, but that is not the truth.
It is important to adhere to digital advertising best practices in order for your conversion rates. There are many options available to you:
Add personalization
It is important to provide relevant content that resonates well with your target audience in order to be seen as relevant. Only then can you expect optimal conversion rates.
Marketers who use personalization reap the rewards. McKinsey & Company’s Next in Personalization Report shows that 71% of consumers expect personalized interactions from companies and that 76% are frustrated when it doesn’t.
Your landing pages should match your ads
Exaggerating the importance of driving clicks is a common error in digital advertising campaigns. This mentality can lead to over-optimization at the pre-ad click stage and under-optimization at the post-click phase, where conversions actually occur.
Your landing pages should meet your expectations. To put it another way, landing pages must be unique for each ad. The messaging must also follow through from the ads to the landing page in order to be effective.
Optimize your landing pages
Your landingpage design will influence your users’ behavior and create a memorable user experience. It’s not enough to have a beautiful page. You also need to make it convert.
Conversion-centered design is a way to focus on creating a website that elicits a specific action. This will increase your conversion rates and foster a positive user experience.
3. Your average order value may be too low
High conversion rates can appear to be a panacea for marketers, but they are vanity metrics that do not reflect the profitability of the marketer.
ROAS is a measure of an ad campaign’s revenue. You must link your advertising converts to an average order value (AOV), which will justify your campaign’s expenses.
Your digital advertising investment, which is the denominator of the ROAS formula, must be proportional to its potential revenues unless your attribution model allows for a higher initial investment in order to maximize future profits. If this is not the case, high financial investments only make sense when there’s high AOV and vice versa.
When optimizing your ROAS, consider your AOV. Your AOV could be the reason for your low ROAS if your conversion rate is below average based on past performance and industry benchmarks. You can use the following strategies in this situation:
- Encourage cross-selling and upsells. Offer related products before and after your customer buys.
- Combine your offers: Offers that are related can be combined with each item at a discount.
- Use email marketing to leverage: Segment your audience based on demographic and behavior data and then send automated campaigns for recurring sales.
Optimizement will eliminate low ROAS
Your returns could be negligible if your ad campaign is too expensive or does not generate enough revenue. It doesn’t have that to be. You’ll get a better ROI if you take the time to optimize cost-per-click and conversion rates.
Instapage can help you launch and optimize landing pages that increase advertising conversions. Learn how Instapage, the leading landing page platform for marketers, can help you increase conversions and decrease your cost-per click. Request an Instapage demo.
