Return on advertising Expenses are a measure used to measure the effectiveness of a marketing campaign on Facebook. We prefer to measure how much revenue is generated for every dollar spent on advertising on Facebook..
ROAS is very similar to another important marketing metric - return on investment (ROI), but ROI is usually used to measure your marketing's overall performance. ROAS, on the other hand, is typically used to measure the effectiveness of a particular campaign, ad group, ad, or even a keyword.
ROAS is a ratio of the total cost of converting a website (according to your events in Facebook pixels) divided by advertising costs. The fact that your ads have ROAS 100 means that for every dollar you invest in advertising, you get 100 dollars in return.
Calculate ROAS target for your Facebook ads
You need to know how much your product is worth and how much you want to earn. These two will determine your selling price.
I created an Excel sheet that helps you find what your target (base) ROAS should be.
Cost ofProduct: How much is this product.
Sale price: How much do you sell your product.
Profit: The net amount you will receive after subtracting your costs from your selling price.
ROAS Break Even: ROAS for each product is indicated in this column. This assumes that you are using all your profits.
ROAS is simply easier to calculate, and these are digital metrics that digital agencies can track daily to optimize campaigns. ROAS helps you determine profitability on a single marketing channel and use it as a guide to determine how successful your campaigns are (or not). Keep in mind that extreme highs and lows are taken into account (in case the selling price of your products ranges from very cheap to very expensive).
however, ROAS calculation becomes difficult when you cannot determine the exact amount of income received from your advertising campaign. This is a fairly common problem for B2B marketers because most of your conversions are done offline with sales calls.
ROAS allows you to create reports that show exactly what kind of income your advertising campaigns bring for business. In addition, it allows you to determine which advertising campaigns are the most and least successful, and, if advertising is worth the expense, it helps you to constantly reduce your expenses in order to ultimately receive the maximum income at minimum costs.
What is the difference between Facebook ROAS and Facebook ROI?
Although these two terms are often used interchangeably, the truth is that they are not exactly the same. ROI means a return on investment, and ROAS means a return on advertising costs. In practice, ROI takes into account all expenses and all expenses accumulated within your business. Not just product related expenses. In this lesson, I will focus on ROAS, but what you choose depends on the needs of your business.
Here's how to calculate your return on investment on Facebook:
ROI Formula: ROI = (Revenue – Costs) / Costs
Percent ROI = Profit – Costs x 100 / Costs
Here is how to calculate Facebook ROAS:
Percent ROAS = (Revenue – Cost) x (100/Cost)
ROAS Formula: = Revenue From Ad Campaign / Cost Of The Ad Campaign
When you are looking at ROAS, you are measuring revenue over costs of marketing campaigns. You are only looking at costs directly related to that specific marketing campaign.
If you run paid ads as part of your marketing initiatives, you need to track the return on advertising costs. This is the best indicator to determine if your campaigns are doing what they are supposed to do: generate revenue for the business.
ROAS is one of the most useful indicators for assessing how well your marketing is doing what it should do: generate new revenue. If you accurately track your online marketing efforts for the sales they generate, calculating ROAS is simple, but how you use ROAS data can have a huge impact on your business .