How much revenue are your advertising campaigns bringing in for each dollar spent?
Many marketers don’t have a precise answer for this question. Beyond a general feeling that advertising is building brand awareness and making sales outreach easier, a lot of marketers struggle to quantify the impact of their ad spend.
That’s a big problem since the amount their companies spend is very easy to put a number on, and leaders often (and very rightly so) want to know what they’re getting back for all of that cash spent.
To illustrate the dollar impact of their advertising efforts, marketers can lean on a metric called ROAS. It aims to measure how much revenue your business earns per dollar it spends on advertising.
In this article, we’ll explore how ROAS works in context, why it’s a useful metric (and when it isn’t), and share strategies you can implement right now to drive your ROAS through the roof.
Return on advertising spend (often written as ROAS) is a marketing metric that measures how much revenue you earn for every dollar spent on advertising.
It purports to help you understand the effectiveness and profitability of your advertising strategy.
The ROAS formula is quite simple:
ROAS = Revenue from Ads / Cost of Ads
For example:
If you spend $1,000 on digital advertising and generate $4,000 in revenue, then your ROAS is 4.
This means that for every dollar you spend on ads, you generate $4 in new revenue.
ROAS is important because it directly measures the profitability and efficiency of your advertising spend.
Here’s why it matters:
Like any key metric, ROAS has some benefits and drawbacks. We’ve already covered many of the pros, such as its usefulness in decision-making and spend allocation.
Other pros of ROAS include the fact that it’s simple and easy to calculate. It can also be applied across all advertising channels.
But what about the cons of ROAS? What prevents it from being a great metric?
The biggest barrier for most teams in using ROAS isn’t even the formula itself; it’s that “Revenue from Ads” isn’t that easy to calculate effectively.
Many teams use arbitrary attribution methods, such as first or last click. These attribution methods say “The prospect clicked this ad, landed on our website, and later bought. The ad is responsible for the revenue generated.”
That’s fine in certain high-volume B2C contexts where people buy right off the back of an ad.
But in the B2B world, customer journeys are much more complex. There are many touchpoints involved, and not just for marketers; sales reps are making phone calls and sending emails as well.
In this context, the ad isn’t solely responsible for that revenue generated. But it also isn’t responsible for nothing. For many teams, deciding how much the ad contributed to the deal is a bit of a guessing game.
Beyond that, there are a few other cons to ROAS:
There really is no “good ROAS” that applies in all scenarios. It depends on your business model, margins, and product or service.
That said, anything below 1 is a sign that you’re losing money on advertising activity, so anything above that might be considered good.
Here are a few benchmarks based on common industries:
Target ROAS is a goal you set for your ad campaigns when you use a tool like Google Ads or Meta Ads. It defines the minimum acceptable return on ad spend and helps automated bidding platforms meet your goals.
For example:
If your target ROAS is 5x, you’re telling your advertising platform to optimise for $5 for every dollar spent. It will automatically bid more or less to hit your return goal.
When choosing a target ROAS, base it on:
ROAS (return on ad spend) and ROI (return on investment) are two similar but distinct metrics for marketers.
ROAS measures how much revenue you earn for every dollar spent on ads, focusing only on ad performance.
ROI measures overall profitability by accounting for all costs, not just advertising.
Here are a few core differences between ROAS and ROI:
If they’re both crucial metrics, which one should you use, and when?
Use ROAS when you want to:
On the other hand, you should use ROI if you want to:
So you’ve measured your return on ad spend and set a benchmark for the metric.
What can you do to boost your ROAS? Here are five strategies you can put into play right now.
Cognism is your marketing team’s secret weapon for boosting return on ad spend.
It can:
For example:
Marketing leaders can tap into Cognism’s signal data to refine account selection, tracking job listings, funding announcements, and technographic changes to find new accounts to add to ad campaigns.
For teams advertising on LinkedIn, Cognism allows you to identify companies based on geographic location (something LinkedIn can’t do) and use key purchase indicators like technographic fit or job titles that don’t exist natively on the platform.
See how the process works - watch this video 👇
This helps revenue teams save money by eliminating wasted ad spend and focusing on what works.
And when you’re not spending ad dollars on non-ICP fit accounts, you’ve got more money to go after truly valuable prospects, increasing your return on every dollar spent on ads.
You can spend as much or as little as you like promoting your company via paid ads, but if your copy, imagery, or offer doesn’t connect, you’re not going to generate any pipeline or revenue, and your ROAS will suffer.
The most effective B2B marketing teams test and optimise for every aspect of their advertising plan. They:
Top tip:
If you’re serious about upping your ROAS, develop an A/B testing program. Invest some ad spend in figuring out what drives the strongest results.
Your ads themselves aren’t the only thing that impacts your ROAS.
In most cases, your ad is just the entry point to a landing page, and the goal of the ad is to get the prospect to click through to that page on your website.
Which means the landing page itself can make or break your ad campaign. If, for instance, nobody who clicks an ad converts on the landing page, then you aren’t generating any revenue, despite how great your ad might be.
That’s somewhat of an unrealistic scenario, but the truth is that no landing page has a 100% conversion rate. The better your landing page is at converting visitors from ad clicks, the stronger your ROAS.
Classic ways to optimise for conversions on ad-specific landing pages include:
This is one of the most powerful ways to get some extra mileage out of your ads and boost your ROAS.
A retargeting (sometimes called remarketing) campaign targets people who have already visited your website with ads that are relevant to what they were doing or looking at.
Say you’re an e-commerce shoe retailer.
You run ads about a new line of shoes you’ve just released, and someone clicks on one of the ads. They browse your whole range, but spend a particular amount of time looking at three specific pairs. However, they leave your site without buying anything.
Your automated retargeting campaign is triggered, which shows that person a new set of ads, one that specifically highlights the exact shoes they were considering buying.
The win here is that you now have some real-world intel on what that individual is interested in.
It’s no longer a guessing game, and you can show them exactly what they’ve already demonstrated interest in, increasing the likelihood of purchase and ramping up ROAS as a result.
A lookalike audience is just what it sounds like:
An audience of people to whom you show ads that “look like” (share similar characteristics to) an audience you specify.
Here, you build a list of contacts that represent a particular audience, such as a group of people who have previously clicked one of your ads and then purchased a result.
You upload that list to an advertising management platform, like LinkedIn Campaign Manager, and the software analyses the attributes of that list of people. It then builds a new audience of people who are similar.
They might be in the same role, work at similar-sized companies, or follow the same pages.
The idea here is that the profile and characteristics of the people whom you’ve sold to previously are linked to their propensity to buy. So, it follows that anyone who shares similar characteristics is more likely to buy than someone who doesn’t.
You’ll need to test it to see if it holds true for your audience, but the tactic has a solid logical basis, and many advertising teams find success following this route.
The most important step you can take to increase your ROAS is to tighten up your targeting.
If you’re getting in front of the right people, you’ll drive more revenue from ad programs and increase your earnings per advertising dollar.
Cognism’s buyer data, powerful intent signals, and advanced filtering help you find and target the companies and decision-makers who matter.
Ready to move beyond LinkedIn targeting and ensure your ads get in front of your ICP? Click 👇