Return on Ad Spend (ROAS) is an important metric for Amazon sellers to measure their success in advertising campaigns. It quantifies the amount of revenue earned from each dollar spent on marketing. When it comes to Amazon ROAS, there are several factors that can influence your results. Let’s take a look at what these are and how you can use them to maximize your ROAS.
Understanding ROAS on Amazon
ROAS is the amount of money you make on an Amazon Advertising campaign for every dollar you spend. In other words, ROAS allows you to measure the success of your ad campaigns in terms of revenue generated for every dollar spent, which helps determine whether campaigns are effective or if they need to be optimized.
It’s important to note that ROAS differs from return on investment (ROI) because it’s calculated based on an individual campaign, not overall investment.
To calculate Amazon ROAS, divide the total sales generated by the total ad spend over a given time period. The higher this ratio is, the more successful your campaign is considered to be.
The formula for calculating Amazon ROAS is
total attributed sales/total ad spend = ROAS
$800 in total ad attributed sales / $100 total ad spend
RoAS = $8
What is a Good ROAS? What Should Be My Target ROAS?
A higher number indicates that your campaigns are performing well and generating more revenue than they’re costing you, while a lower number means that you might need to adjust your campaigns in order to get a better return.
A typical good Amazon ROAS is somewhere between 3 and 5. This may change depending on your industry’s average profit margin.
Tracking Your Amazon ROAS
Once you understand what your current Amazon ROAS is, you can begin to make adjustments in order to increase it. To do this, start by looking at which campaigns and products have the highest ROAS. This allows you to identify which products and campaigns are most profitable and should be prioritized when creating new ads or making changes to existing ones. Additionally, analyzing metrics such as impressions, clicks, conversion rate, etc., will help you determine where improvements can be made in order to increase your overall profitability.
Using myHorizons to Track Amazon ROAS Over Time
It’s also important to track changes over time so that you can see how your campaigns are performing after any new changes or adjustments have been made. This allows you to quickly identify whether or not changes have had an impact on your overall ROAS performance and if further adjustments need to be made in order for your campaigns to remain successful.
myHorizons helps track Amazon ROAS and other key metrics over time so that businesses can gain an understanding of how their campaign performance evolves and fluctuates in response to changes or tweaks. With myHorizons, companies have access to easily understandable visualizations of their data, enabling them to make insightful and informed decisions on optimizing their ad campaigns.
Factors that Impact Amazon ROAS
There are several factors that can affect the performance of your Amazon advertising campaign and thus your ROAS as well.
Some of these include…
- target audience selection
- bid price optimization
- creative optimization
- keyword targeting
- product selection
Each of these should be taken into consideration when planning and running your campaign as they all have an impact on its performance and ultimately its return on investment.
Improving Your Amazon ROAS
Once you identify the factors that influence Amazon ROAS, you can begin taking steps to improve it…
Focus on Optimizing Your Ads
Your first step should be to focus on optimizing your ads for better performance. This means testing different ad types, budgets, bids, and targeting options until you find the combination that works best for you. With Amazon Ads, there are many variables to consider when creating campaigns. You may need to experiment with different keywords or bid types in order to achieve the desired result. Keep in mind that even subtle changes can have a huge impact on ROAS, so it’s important that you take the time to test and refine your campaigns as needed.
One way to do this is by focusing on targeting the right audience for your product or service. This includes looking at demographics such as age range, gender, location etc., in order to identify potential customers who may be interested in what you have to offer and tailoring ads accordingly.
Additionally, optimizing bids for keywords can help ensure that you’re spending money efficiently while still reaching potential customers with relevant ads.
Finally, testing different creatives for ads can help ensure that they’re resonating with viewers and driving more traffic (and therefore more sales).
Optimize Your Landing Pages
Once you have optimized your ads, the next step is to optimize your landing pages. Ensure that the page visitors land on after clicking through from an Amazon Ad contains relevant content related to the ad they clicked on, and has a clear call-to-action that encourages them to make a purchase. Make sure also that all images are high quality, there are no broken links or other technical issues, and any copy included on the page is proofread and free from typos. Additionally, make sure that they load quickly and look great on both desktop and mobile devices. All of these factors will help improve conversion rates, which will directly affect your ROAS numbers.
Understand Your Customer’s Journey
Understanding the customer’s buying journey is essential for optimizing your ads and achieving a good ROAS. If you don’t understand what customers are searching for when they find your product, then you won’t be able to target them effectively with Amazon Ads. Researching what terms people use when searching for similar products will help you craft targeted ads that will reach the right audience and ultimately increase conversions.
It is also essential to be tracking customer journey metrics on Amazon. The metrics can be hard to calculate, which is why they often get ignored. Using our software (myHorizons) we track:
- New to Brand Customer vs Returning Customer count
- LTV (lifetime value)
- CAC (cost of customer acquisition)
- AOV (average order value)
- Repurchase Rate (at the brand and ASIN level)
- Cross Selling Data
- Average Repurchase Interval
Utilize Software Tools
Finally, making use of automation tools can help take some of the burden off of manually managing campaigns and allow you to focus more time optimizing for higher ROAS numbers.
Other tools such as myHorizons provide comprehensive analytics so sellers can track their progress over time.
Measuring Amazon Return on Ad Spend (ROAS) is an essential part of understanding the success of your campaigns and ensuring that they are generating profit for your business. Taking the time to analyze metrics such as impressions, clicks, conversion rate, etc., will allow you to identify which products and campaigns are performing best so that you can make informed decisions about where improvements need to be made in order for your business’s marketing efforts to remain successful over time. With proper optimization techniques, Amazon sellers can use this data-driven approach for driving more sales and maximizing profits with less effort!
Get Started with myHorizons for Free
myHorizons is the perfect Amazon brand management tool for businesses of all sizes. With myHorizons, you can easily and effectively manage your Amazon listings, discover key insights, track your progress, and more.
Now you can try myHorizons for free with our month-long free trial. myHorizons free trial pulls 60 days worth of data into the platform for your analysis, upgrade to a paid account to access all historical data.
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