I recently posted an article on LinkedIn called “Understanding ROAS & 5 Ways to Improve It” where I covered a handful of tactics to improve ROAS for performance marketing campaigns. If you’re not following me on LinkedIn, I figured I would go ahead and reshare the majority of the article here, as well as a few things I didn’t mention in my original post.
First, if you’re not familiar with ROAS – return on ad spend – it’s a metric performance marketers use to gauge the efficiency of their campaigns. Broken down at its basic level, if you spend $100 on advertising a product that drives $500 in sales, you’ll have a 5:1 return or 500% ROAS. Businesses who use various forms of new customer acquisition marketing (PPC, retargeting, affiliate marketing, etc.) have to invest into these channels, but should always strive to do so with a positive return.
I’ve had the privilege of inheriting some e-commerce paid search campaigns that were severely underperforming. The particular retailer I’m thinking of was spending $5,000 a month in product listing ads on Google, but was only making $5,200. From a pure profitability perspective, the advertiser was only making $200 for this particular campaign. In some cases advertisers have to ignore performance metrics in lieu of growing a brand. I get it and I’ve done it myself, but you still have to hold yourself to an efficiency target.
5 Ways to Help ROAS / Paid Search Efficiency
Before wanting to change the efficiency of your campaigns, consider this: what is a realistic ROAS for your business? There a handful of factors that can go into determining an ROAS and it’s important for you to weigh each of them before saying “my ROAS is terrible” or “I have a great ROAS”.
Once you have a solid understanding of what your business’s ROAS target is, you can improve it in a few ways:
Review Targeting Settings in Google Ads
Google provides its advertisers with a large variety of targeting options. Device targeting, geographic / location targeting and even time of day (ad scheduling) are all available to advertisers. Thoroughly review all of your targeting settings to discover where you may be wasting ad spend.
The use case: spending money on ads in the middle of the night or on days that don’t convert for your business are a waste. Apply negative bid modifiers through ad scheduling settings to save money and increase ROAS.
Review Search Terms
This tactic is mostly for Google shopping campaigns and involves negating search terms that you don’t want matching to your products. There could be one snippet of text in your product title or description that causes it to match to a variety of unprofitable terms. Constantly vetting your search terms and negating the poor performers will inevitably reduce wasted ad spend and improve your campaigns’ ROAS.
Review Match Types
All too often I see campaigns focusing on broad match keywords and they are wasting money on overly generic terms. Trim your ad spend for broad keywords and focus more attention on exact match terms. This could require a shift in how you target head, torso and long-tail searches, but it will net a positive return in the long run. Begin the process by evaluating the percentage of spend going to broad match keywords versus exact match so you can establish a healthy baseline of how much spend you might be able to reduce.
Improve Your Landing Pages
When a customer lands on your product page and can’t find the add to cart button, they are not going to be able to checkout on your site. That’s a major problem and leads to marketing efficiencies looking way off. Make sure your landing pages match your ad content as much as possible (for PLAs and standard text ads) and be sure to shop your site how you think your customers would. If you’re still not converting shoppers and your ROAS is tanking, consider a 3rd party UX / landing page optimization firm to help you pinpoint what might be wrong. It could be simple things like font sizes, colors, oversized images, etc.
Fun fact: red does not help convert. I once watched a company put red on everything and wonder why it struggled to convert. The site was a bit of an eyesore, but not even the data could change the opinion of site’s founders.
Review Partner Sites / Networks
Outside of Google search, advertisers have the option to display ads on Google’s partner sites (i.e., Ask.com – powered by Google search) and through Google’s Display Network. If these sites make up a large portion of traffic and/or spend without the desired conversions, you may want to consider restricting your ads from showing here.
Don’t Forget Bing
While I didn’t include this in my original LinkedIn article, advertisers can’t forget about Bing. For paid search and SEO alike, a lot of marketers just forget about Microsoft’s flagship search product. However, a few conversions here and there stemming from a relatively low investment can mean huge gains in ROAS. I recommend conserving 10% of your Google Ads budget and devote it to Bing. All of the aforementioned tips from this post still apply as you’ll want to review settings, work on landing pages and routinely review search terms in Bing.
Try any of these tips to correct efficiency issues. It’s like a combination of a few factors rather than one individual element causing your ROAS to underperform. And if you need help identifying any gaps in your paid search strategy or how to jumpstart ROAS, drop me a line anytime at email@example.com.