Ways ROAS and POAS Affect an Ecommerce Business

You’re undoubtedly already measuring KPIs like Cost Per Click, Click Through Rate, and Cost Per Conversion if you’re running PPC advertisements for your eCommerce site.

That’s all well and good, but what about your ROAS? Those of you who aren’t paying attention to your ROAS and POAS marketing are likely losing money. We’ll walk you through it in this article. You’ll be much more positioned to fine-tune and optimize your efforts once you grasp how ROAS comes into the picture.

What is the typical ROAS? What is the target ROAS that you should aim for?

That stated you must consider ROAS in the context of your profit margins, operating expenses, and marketing objectives and goals (to identify what works for you). For example, imagine you’re a firm with $500,000 in investment, and you’re introducing a new product that’s unlike anything else on the market. Your strategy here would not be to optimize for 4x ROAS because your goal is to educate people about your product and create awareness. After all, you’re aiming to educate people about a new product, so conversions aren’t expected straight away.

In this case (and assuming that money isn’t an issue! ), we’d recommend settling for a 1x or 2x ROAS for your first few campaigns. Work on obtaining that 4x ROAS once consumers become more familiar with your product and you go into the next phase of your marketing campaign (where the goal is to drive actual sales). Aside from your marketing objectives, you must also consider your profit margin. If you’re selling $10 phone cases that you dropship from China and your profit margin is razor-thin, keeping your advertising expenditures low is critical. In that instance, the larger your ROAS, the better. However, if you’re selling pricey electronics with a big margin, you can get away with a smaller ROAS.

FOR ECOMMERCE STORES, ROAS ARE ESSENTIAL

Because people are typically loss-averse, we default to optimizing for metrics like Cost Per Conversion when running PPC advertising. This makes sense on many levels. After all, we have limited ad budgets to work with, so stretching every dollar is in our best interests. However, employing Cost Per Conversion (rather than ROAS) may lead you to make some short-sighted decisions.

WAYS TO IMPROVE ROAS AND POAS THAT HAVE BEEN TRIED AND TESTED

Remember that it is made up of two components (your revenue and ad expenditure), therefore you can either:

• Increase the amount of money you make from your advertising, or
• Ad prices should be reduced.

Improve Your Ad Copy

You could be selling the most cutting-edge, incredible, game-changing product on the market. However, if your ad creative is generic and uninspiring, your ad campaigns are unlikely to be successful.

Make Certain That Your Message Is Consistent

Message matching can also help you enhance ad revenue and conversions. If you’re unfamiliar with the term “message-match,” it simply means that the content on your ad and landing page should be the same.