What is Return On Ad Spend (ROAS)?
Return On Ad Spend (ROAS) is a metric that shows you how much value your customers are bringing into your store compared to your marketing ad spend. You can find your ROAS by taking the total conversion value (revenue) for new customers divided by your advertising costs. Return On Ad Spend (ROAS) expressed as a formula: ROAS = (Total Sales) / Advertising costs. For each $ spent on ads it shows how much are returning in revenue. $1 = 100%
It includes all - both new & returning but there are unique metrics to look at just New ROAS and Returning ROAS, or ROAS using Net Sales.
Why is Return On Ad Spend (ROAS) important?
ROAS is an especially important metric when you start adding layers of advertising spend to your marketing strategy. From social ads, Google Ads, to paid banner ads, PPC campaigns and more, you want to have a way of telling how much return you are getting on your investment. Are all those ads translating to lucrative customers who will bring in a high lifetime value (LTV) by purchasing often? Your ROAS metric helps you set your budget and manage your marketing spend.