ROAS Calculator: How to Calculate Return on Ad Spend and Improve it

Laura Caveney
29th July 2021
Analytics

If you’re investing in paid advertising, then you need to ensure you’re driving your bottom line. With our ROAS calculator, you can keep track of your progress and optimise your paid campaigns.

Paid campaigns are a great way to drive traffic to your site. And, if your website is highly converting, then you can generate leads and sales through paid too.

But paid advertising comes with a lot of risks. It can often be quite expensive, so you want to be sure you’re getting a real return on your investment.

If you’re spending more money than you’re generating in revenue, then you need to look into what isn’t working and how you can improve it.

We support paid advertisers to make more from their campaigns, so in this blog, you can learn:

So, let’s learn how to maximise our paid ads.

 

What is ROAS?

ROAS, or return on advertising spend, is a marketing metric used to measure the performance of your paid advertising campaigns.

This metric is essential to track if you’re using paid as part of your marketing strategy, as it allows you to track the effectiveness of campaigns based on their impact on your bottom line.

Our ROAS calculator will help you understand your ROAS, and see what revenue your advertising is bringing in.

For example, if you spend £1,000 on paid advertising across a variety of channels, and found these ads brought in revenue totalling £5,000, then your ROAS would be:

£5,000/£1,000 = 500%

If you then break down your ROAS by each channel, you can identify which are working hardest to bring you revenue. Then, you can push more budget into what you know is working.

 

Why do you need to calculate ROAS?

It seems pretty obvious, but ROAS is a direct metric that allows you to discern the good from the bad. That’s good leads from bad leads, good marketing returns versus bad ones (or rather a lack of).

 

Without revenue in the mix, you’re making decisions on your output based on very limited data. And while a hunch can get you so far, it’s never going to take you the whole way.

 

How to calculate your ROAS

ROAS is the amount of revenue you receive for every dollar spent on advertising. You can calculate ROAS across all of your advertising channels, or break it out channel by channel.

The higher your return on ad spend, the more effective the ad source is.

To calculate return on ad spend, use this formula or our ROAS calculator below:

 

ROAS = (Revenue derived from ad source)/(Cost of ad source)

 

ROAS Calculator

Calculating ROAS for offline conversions

Do you rely on a sales team to convert your leads offline? Whether you convert users over the phone, email or in-store, there are ways to track and measure your conversions and ad impact on revenue generation.

 

The issue with offline conversions and ROAS

Imagine it like this. Someone visits your site from a PPC campaign. They engage with your website but instead of filling in a form or speaking to a sales rep over live chat, they pick up the phone.

 

Your sales rep might ask this inbound call where they heard of your business. And they might say Google. But you won’t be able to correlate that specifically to paid. And you won’t be able to correlate it to a specific campaign or keyword.

 

So, if that user converts into revenue, your return on ad spend isn’t going to be accurate. If you can’t accurately measure who is converting as a result of your paid advertising, then you need to find a better solution.

This is where we come in.

 

How Ruler can support ROAS for offline conversions

Ruler Analytics can help you track ad impact on your offline conversions, by both tracking leads and revenue generation.

Here’s how it works.

Ruler tracks visitors to your website across multiple sessions until they convert into a lead.

conversion tracking for ppc

Ruler Analytics can track conversions via phone call, via form submissions and even live chat. At this point, Ruler will fire all of the data it holds onto that lead into your CRM.

There, you will be able to see the customer’s full marketing journey.

Ruler will continue to track visitors and leads to your site. At the point of sale, again, whether that’s online or offline, Ruler will fire the revenue data into your analytics tools.

So, whether you use Google Analytics or Ads, you can see how much revenue each marketing channel, campaign (and even keyword), is generating.

 

How to improve your ROAS

Now you’re tracking all touchpoints of your marketing campaigns, you can easily attribute online and offline conversions to marketing channels, campaigns and even keywords.

 

💡 Pro Tip: With Ruler in place, you can completely revolutionise your marketing strategy. With revenue as your main metric, you can optimise your campaigns based on what’s driving more to your bottom line.

Read how Ruler can specifically support your paid advertising campaigns. 

 

Using your ROAS calculator, you can then optimise your campaigns by:

 

Turning off ads that aren’t impacting revenue

By using marketing attribution tools like Ruler, you can determine which ads, and even keywords, are resulting in more revenue.

Even if you use offline conversions, like phone calls, email or store visits, we can help you monitor which ads are working, and which aren’t. You can then make informed decisions on what to give more budget, and what to turn off.

 

Testing your ad campaigns more effectively

Testing on paid can always be a little scary. However, when you have proper tracking setup, you can see the true impact of small changes. And you would be surprised by how much a small change can impact lead conversion.

Test out ad copy changes, add extensions, trial new keywords. By monitoring your ad performance both within the native tools, and marketing attribution tools like Ruler, you can build up a strong profile of what works for your audience.

 

Smart bidding

Smart bidding is a feature offered by Google Analytics that allows you to pass the reins over to Google. Forget manual bidding, and fighting for keywords that you don’t know work. By using smart bidding, Google’s machine learning will optimise your bids and keywords based on your chosen strategy.

Related: A complete guide to Google’s smart bidding from Google Account Manager

 

Seeing your ad campaigns holistically

Your ads might not be sending users directly to conversion. They might however be working to drive awareness of your brand. If you can’t see the full customer journey of your users, then you can’t fully understand the role that paid advertising plays in your marketing.

By using marketing attribution tools like Ruler Analytics, you can see all of your users’ touchpoints. This is essential to be able to view your paid advertising holistically. Especially if you use offline conversions, a user might not convert into a lead via the first touchpoint.

But, a paid ad might drive awareness, for them to later return via organic social, direct search or more.

 

Wrapping up

And there you have it. Use our ROAS calculator to understand how your paid advertising is working on your bottom line. Then, install Ruler Analytics into your marketing reporting so that you can understand the role paid advertising has across the customer journey.

And remember, Ruler is the only tool where you can view your final revenue figures against your marketing channels and campaigns. While Google Ads assigns arbitrary values to conversions, with Ruler, you can get the real deal.

Book a demo today, or download our eBook on closed-loop marketing attribution and find out how it can help you connect the dots between your offline sales and users’ online searches.

revenue attribution marketing attribution - ruler analytics