How to use a target ROAS to boost your client’s bottom line

While PPC advertising has had some shake-ups in recent years thanks to new privacy and cookie policies, this key facet of digital marketing isn’t going anywhere.

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In this guide, we’ll explore how using target ROAS can dramatically enhance your client’s PPC advertising revenue, align ad spend with business goals, and boost overall profitability.

Table of Contents

• Target ROAS meaning: What is target ROAS?
• How does target ROAS work?
• The power of target ROAS: 10 Key benefits
  1. Puts the focus on performance
  2. Promotes an efficient use of ad dollars
  3. Target ROAS is a goal-oriented strategy
  4. Improved performance analysis
     • Pro-tip
  5. Easier budgeting
  6. More informed campaign optimization
  7. ROI is front and center
  8. Target ROAS fits into broader marketing strategies
  9. More informed resource allocation
     • Pro-tip
  10. Having a data-driven framework
• Target ROAS vs. other bidding strategies: What’s the difference?
• Setting up target ROAS: A step-by-step guide
• Measuring target ROAS: Tips and best practices to maximize results for your clients
  • Make sure conversion tracking is properly set up
  • Choose an appropriate attribution model
  • Set up conversion values
  • Tap into advanced tracking techniques
  • Look at ROAS across different levels
  • Dig into the data on analytics platforms
  • Integrate with CRM and Sales Data
  • Keep an eye on those cost metrics
  • Evaluate the customer’s lifetime value (LTV)
• Frequently asked questions
  • How long does it take to see the impact of target ROAS on campaign performance?
  • Are there any limitations or challenges with target ROAS?

Target ROAS meaning: What is target ROAS?

Target return on ad spend, or target ROAS, is a performance metric in PPC advertising that uses AI and machine learning to optimize bidding strategies based on predicted conversion values. Available on platforms like Google Ads and Facebook Ads, target ROAS dynamically adjusts bids on each ad based on the expected return, bidding higher for searches likely to generate high-value conversions and lower for those predicted to be less promising.

Target ROAS aims to balance advertising spend with expected revenue, tailoring the use of advertising dollars to maximize the effect of your client’s digital marketing investment.

How does target ROAS work?

Target ROAS works by using AI-powered insights and predictions to make an informed guess, or estimate, about how much revenue each ad can generate when someone uses a given search term. It requires data from past conversions to make predictions about future conversions, so some existing conversion data is required. For example, using target ROAS for Google Display ads requires at least 15 conversions in the past 30 days to work (Google).

To illustrate how this works in practice, let’s say one of your digital ads management clients sells online courses for creative freelancers. You decide to use target return on ad spend for their Google Ads campaign focusing on their new introductory web design course. If you set a target ROAS of 400%, it means that for every dollar spent on ads, your aim is to get back $4 in sales. Google’s Smart Bidding algorithm would analyze their historical sales data and use other real-time signals, like the time of day or the type of device being used, to make predictions about future conversions.

During the campaign, a user who has previously visited your client’s website might search for “web design courses”. Based on their past activity, Google’s algorithm might determine this person is highly likely to convert. As a result, they would automatically increase your client’s bid, increasing the chance of outbidding other advertisers and winning that conversion. At the same time, another user searches for “advanced coding for web design”. They are less likely to convert on an introductory course, and Google’s algorithm responds by reducing your client’s bid.

All of this happens in real time, for each ad auction, making sure you get the most bang for your client’s ad bucks. In balance, Google will try to achieve your target ROAS of 400% even if individual conversions fall above or below the target. Similarly, daily ad spend can fluctuate considerably, while staying within a given monthly budget.

The power of target ROAS: 10 Key benefits

Whether you handle your ads management in-house or you use white-label PPC experts to help you scale your business, it’s important to have a solid understanding of the “why” behind PPC bidding decisions. This will help you make better decisions when managing campaigns, and ensure you can comfortably discuss your campaign strategies with clients.

Here’s why target ROAS is a powerful bidding approach every PPC reseller agency should know about.

1. Puts the focus on performance

No matter who your clients are, we can confidently say that generating more revenue is a high priority for them. ROAS is an indispensable metric for gauging the efficiency of digital marketing strategies since it’s inextricably linked to revenue generation.

By emphasizing the performance of campaigns, using target ROAS ensures that advertising campaigns stay on track in terms of helping your clients meet their ultimate marketing goal of maximizing the return on their investment (ROI). Instead of prioritizing more activity on an ad campaign, such as more clicks, this bidding approach finds the best path toward the true desired outcome of running a profitable ad campaign.

2. Promotes an efficient use of ad dollars

Digital advertising isn’t a particularly low-cost marketing technique, and many SMB clients who are new to advertising on Google, Facebook, and other platforms have justifiable trepidation about sinking their limited budgets into ineffective campaigns. Using the target ROAS campaign goal can help assuage these concerns.

The use of a target ROAS bid strategy effectively means that all of the AI-powered insights of massive platforms like Google and Face are put to work to ensure the most efficient use of ad dollars for a given goal. Plus, the more data is collected in the form of conversions, the more efficient the use of your client’s ad budget becomes.

3. Target ROAS is a goal-oriented strategy

Rule number one of any digital marketing strategy is to start with clearly defined objectives. Using the target ROAS campaign goal does just that by establishing a clear, specific objective that informs how a given campaign will progress. By coming up with a realistic target ROAS and working from there, you can inform other key levers in the digital ad setup process, like the audience targeting parameters. As your client campaigns progress, referring to the achieved ROAS provides an easy to understand performance indicator that shows if the campaign is meeting its goals or if it needs to be re-worked and improved to reach the target return on ad spend.

4. Improved performance analysis

Using the target ROAS bid strategy gives marketers an excellent way to easily determine the comparative performance of each part of a campaign. Consider the way most PPC campaigns are structured: you may have a range of campaigns for each client, each with a variety of ad sets based around different keywords, which in turn each contain several ads.

All together, managing ads for a single client can mean having to keep an eye on dozens or even hundreds of moving parts at the ad, ad set, and campaign level. If you’re using multiple ad platforms, you can multiply that complexity.

ROAS bidding serves both as a strategy and a performance metric, enabling you to quickly glance at the performance of each component of a campaign and easily decide which to keep running and which to kill.

Pro-tip

Save your team—and your clients—the headache of logging into each ad platform individually by using an all-in-one platform like Vendasta’s Advertising Intelligence. Since its dashboard is fully customizable, you can set the ROAS of each campaign to be easily visible on a single page. The result? Dramatically simplified digital ad management.

5. Easier budgeting

Using the target ROAS campaign goal to analyze the performance of different campaigns and channels equips marketers with a high-precision budgeting tool. This key indicator makes it easy to see which areas of a campaign are producing the best returns for the money invested. Once you have some data on a client’s campaign, just reallocate funds to high-performing ads and ad sets to generate better results over time.

Plus, by using ROAS bidding, you can be confident that your campaigns will stay on budget over time, without needing to stress about fluctuations in ROAS from one conversion to the next.

6. More informed campaign optimization

Managing ads is an iterative process, and the first shot is rarely the best. Instead, all elements of an ad, from the keywords and audience targeting to the visuals and ad copy should be continually A/B tested and refined. Luckily, using target ROAS bidding provides a shortcut to doing just that.

When evaluating a range of ads, ad sets, and campaigns, note the characteristics of the top performers. Do they use a particular type of language in the ad copy? Do they experiment with a new target audience parameter? Insights from high-ROAS ads can help you craft continually better ads for your PPC clients.

7. ROI is front and center

ROAS is a straightforward, easy to understand measure of the return on investment on your client’s advertising activities. It quantifies exactly how much revenue each dollar of ad spend is generating, providing a clear evaluation of the profitability of a given marketing campaign.

With this assessment, agencies can pinpoint the exact return they’re generating with their ad management services and communicate the value of their efforts to clients. Target ROAS effectively demystifies PPC ad performance analysis by acting as an accurate indicator of whether ROI goals are being met.

If you bundle PPC with other services like local SEO marketing, being able to clearly show the effect on your client’s bottom line of your various marketing activities is essential. Using ROAS bidding will help you effortlessly disentangle the revenue generated from PPC ads, so you can accurately report on the results of each service you deliver.

8. Target ROAS fits into broader marketing strategies

PPC ads are usually just one part of a complex marketing strategy that can include SEO, social media management, reputation management, and more. The different pieces of a strategy need to be in sync to ensure that your clients meet their ultimate business goals.

By focusing on a target ROAS, marketers can devise and implement campaigns that don’t just drive traffic or clicks but rather convert into profitable customer actions, supporting the overall objectives of SMBs. ROAS bidding makes it easier to get the best possible result within the constraints of a client’s budget.

9. More informed resource allocation

Decision fatigue is real, and marketers know that better than anyone. Wasting time and brain-power on small decisions each day can quickly make you or your clients feel burnt out.

The result? Poorer decision-making, and inferior PPC ad outcomes.

Luckily, using target ROAS for Google Ads and other platforms provides a shortcut to better decision-making about how to use resources. This can help you bypass decision fatigue and feel confident that the choices you make about campaigns are optimal and data-informed.

Pro-tip

Even when using target return on ad spend as a bidding strategy, there is only so much one person or team can do in a day. If you want to scale your agency to new heights without getting overwhelmed or letting the quality of your services slip, white-label pros working under your agency’s banner is your new secret weapon.

10. Having a data-driven framework

Intuition may be valuable, but when it comes to running PPC campaigns that convert, the proof is in the numbers. Target return on ad spend equips marketers with a concrete, data-driven decision-making framework.

By using this metric, you can more easily prioritize strategies and tactics that have the best probability of yielding a larger return on ad spend. When you base decisions on the target ROAS campaign goal, you and your team can move away from guesswork and instinct and instead use hard data to guide actions.

Target ROAS vs. other bidding strategies: What’s the difference?

If using a target ROAS bid strategy is so great, why bother with other bidding strategies at all? Each campaign is unique, and understanding the differences between different bidding strategies can help you make sure you choose the best one for your client’s goals, budget, and other variables.

Setting up target ROAS: A step-by-step guide

Setting up target ROAS on Google Ads requires the following steps:

1. Sign in to your client’s Google Ads account.
2. Click the “Tools and Settings” menu along the top right of the dashboard
3. Under the “Measurement” menu that appears, click “Conversions”.
4. Create and name your new conversion, or select one to edit.
5. Important: In the value field, select “use same value” and enter a value if every conversion has the same value (ie. a single product business where people can only buy 1 unit), or select “use different values” if each conversion should have a unique value (ie. most e-commerce businesses).
6. If selecting “use different values”, ensure the Google Tag is properly set up to track conversions.
7. Next, under Campaigns, create a campaign or select one to edit.
8. Where it says “Bidding” under the “Settings” menu, click “Maximize Conversion Value”.
9. Check the box that says “Set a target return on ad spend (optional)”.
10. Enter your target ROAS.
11. Save.

The ideal target ROAS for each client can vary considerably depending on factors like profit margins and price point.

Measuring target ROAS: Tips and best practices to maximize results for your clients

While target ROAS is a highly effective metric for assessing campaign profitability, it’s important to know how to use it correctly. Without the proper set-up, you can end up with data that doesn’t accurately reflect the effectiveness of your campaigns. Avoid common mishaps by using these tried and true tips and best practices for using and measuring target return on ad spend.

Make sure conversion tracking is properly set up

Conversion tracking provides the raw data required to accurately gauge the impact of your ads. Using tools like the Google Tag and Facebook Pixel for conversion tracking allows you to measure the success of your campaigns by accurately tracking every conversion and all revenue generated from each ad.

With conversion tracking, you can see precisely which ads are driving the most traffic and which are producing the greatest number of conversions. Without this data, it’s impossible to gauge ROAS and, in turn, make data-informed decisions about your campaigns.

Choose an appropriate attribution model

Customers may interact with several ads before finally converting. Marketers make decisions about how to identify which ads or marketing actions produced a conversion, and the best choice may vary from one business to the next.

For example, consider a client with multiple ads running across various channels, including social media, Google, and email campaigns. Their audience may see an ad on Facebook, then later they might click on a Google ad before finally making a purchase. Proper attribution is about figuring out which of these interactions should get the credit for leading to the sale.

Different attribution models exist to do this, like last click or first click.

Set up conversion values

For most businesses, each conversion value is unique. In other words, sales vary in value depending on what their customers purchase. To properly capture this variation (and, in turn, correctly collect ROAS data), conversion values must be properly set up as variable.

There are also some cases in which you might manually enter a single conversion value for all conversions. For example, if an ad campaign takes users to a single sales page selling only one product it may be appropriate to establish a single conversion value. However, for most SMBs, it’s important to capture the variation in conversion values.

Tap into advanced tracking techniques

Advanced tracking techniques like UTM parameters, custom URL parameters, and tracking templates can offer more insights into campaign performance. These techniques provide granular data on campaign effectiveness across various channels, allowing for more precise optimization and better ROAS calculations.

Another reason to familiarize yourself with advanced tracking techniques is that they can sometimes provide richer data than is available with standard tracking, especially in an advertising landscape with increased security and privacy measures.

Look at ROAS across different levels

ROAS isn’t just for ads: it can also be analyzed at the ad set and campaign level.

Evaluating ROAS for campaigns and ad sets can highlight which are performing best. This detailed level of analysis can lead to more efficient budget allocation and helps pinpoint sub-par campaigns for optimization, driving overall ad performance improvement.

When it comes to using a target ROAS bid strategy, you can also play around with applying it to the ad, ad set, or campaign level.

Dig into the data on analytics platforms

Analytics platforms like Google Analytics, Meta’s Ads Manager, or third-party tools like Vendasta’s Advertising Intelligence provide robust data and reports on ROAS and overall ad performance.

Using these platforms can help you understand how different components of your campaign impact ROAS, and can dramatically simplify the ads management process by providing clear, easy-to-understand data.

Integrate with CRM and Sales Data

For some businesses with more complex sales cycles or offline sales channels, it’s not as easy as directly attributing each sale to an ad. That’s why integrating your ad platforms with a CRM system or other sources of sales data can give a more comprehensive view of ROAS bidding.

By understanding the customer journey, including offline conversions, you can ensure you’re factoring in all sources of revenue when calculating ROAS.

Keep an eye on those cost metrics

Target ROAS is a powerful metric, but that doesn’t mean other metrics should be ignored. Cost metrics like the cost per conversion, cost per click, or cost per thousand impressions (CPM) are also important for assessing how efficiently an ad budget is being spent.

Monitoring these metrics in tandem with ROAS can help you identify potential areas for improvement and make adjustments to campaigns as needed.

Evaluate the customer’s lifetime value (LTV)

Understanding the long-term impact of your advertising efforts enables you to make more informed decisions regarding your target ROAS.

It’s not just about immediate returns: the potential future revenue from acquired customers should also be factored in when making advertising decisions. For example, if most customers acquired make subsequent purchases, that value can also be attributed to the ad spend that caused them to convert in the first place.

Frequently asked questions

How long does it take to see the impact of target ROAS on campaign performance?

The impact of target ROAS on campaign performance varies, but typically, it takes a few weeks for machine learning algorithms to fully optimize. The more conversion data is gathered, the better the algorithm becomes at delivering a target ROAS by making informed adjustments to bidding strategies.

Are there any limitations or challenges with target ROAS?

Yes, target ROAS does have some limitations. It requires historical conversion data to function properly, so it might not work well with low conversion rates. It’s also sensitive to changes in product pricing or conversion value, which can affect the accuracy of its performance. Finally, it may not be appropriate for campaigns with conversion that don’t have a value attributed to them, such as newsletter signups.