What is ROAS & Why Is It Important in Ecommerce?

What is ROAS & Why Is It Important in Ecommerce? | Digital 38

You must have encountered the term ROAS during the start of your Ecommerce journey. Did you ever wonder what it means, and why experts are urging most online business owners to learn about it and what it brings? Fortunately, Digital 38 is here to guide you to understand what ROAS is, and why you should pay attention to it.  

What is ROAS?  

ROAS basically stands for Return on Ad-Spend (ROAS). Its expounded name is rather self-explanatory but we still need to elaborate it in order for us to understand its purpose and value.  

ROAS refers to the earnings you gain after running ad campaigns. And its application or use is not only limited within brick-and-mortar shops. With Ecommerce rapidly growing, marketers and business owners alike leverage marketing strategies – be it the traditional OOH or digital ones – to boost traffic and sales.  

Calculating ROAS 

Finding out your business’ ROAS is pretty easy as it involves simple math. All you have to do is divide your total advertising revenue with the total cost spent on executing your ad campaigns. Then multiply the quotient by 100.  

For example, if your online shop generated SGD200,000 for a month-long sales event, and you spent a total of SGD100,000 for your ads and other marketing tactics for it, then your ROAS is 200%.  

Why Should I Pay Attention to ROAS?  

Some businesses just take ROAS for granted, or worse – do not consider them as part of their overall growth plans and decisions. Below are some key takeaways for you to know why ROAS is important, even in Ecommerce.  

Optimise Budget Planning

In every business, it is important for managers and key-decision makers to map out their expenses and earnings. After all, you need to make sure you’re raking in more sales than costs. Calculating your ROAS will definitely help you optimise your financial statements, including budget plans, as they will give you an idea of how much you will be investing in your business in the future. 

Determine Ad Campaigns’ Performance

One of the key objectives of ROAS is to point out how well your campaigns are doing. The higher the revenue, the higher your ROAS will be. And the higher your ROAS are, it usually indicates that your ads are effective in attracting buyers to purchase your products online. On the other hand, if your ROAS turned out to be lower than you’ve expected, or did not meet the target you’ve initially set, you may reconsider the ads and strategies you deployed for your recent campaign.  

Help You Arrive at Better, More Informed Decisions

As mentioned previously, some business owners and managers do not consider ROAS as part of their decision-making process. However, the case should be the opposite as reports or data involving ROAS will guide you in formulating your next steps. Even better, it will help you arrive at better and more informed decisions.  

Learn More About Ecommerce 

Running an Ecommerce sounds easier than done, and this is why business owners seek the guidance of professionals in charting their course. If you want to learn more about Ecommerce, read our articles below. 

Or you can consult our team of Ecommerce specialists who can give you support in achieving your business goals. 

Schedule an appointment with us now.  

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