What is a Good Amazon RoAS?
If you want to improve your product discoverability, increase sales, and improve your organic rankings, then one of the effective ways could be running sponsored ads for listing on Amazon. Choosing an advertising presence in the marketplace can be a worthwhile investment and bring high returns for your business. Hence, you must measure your campaign's performance to gain profit from advertising. By Amazon RoAS calculation, you can measure your advertising effort's success. The advertising dashboard of Amazon already offers vital metrics to help you make the right decisions with different metrics like ad sales and ad spending.
Nowadays, monitoring RoAS has become very important for the advertising climate. Research shows that digital advertising increased to $602.25 billion in 2022, which is a growth of 15.6 percent compared to 2021. Therefore, you need to understand a good RoAS for your business. This post highlights the meaning of RoAS, its calculation, the production of the highest RoAS, and many more.
Understanding Amazon RoAS and How to Calculate It
Amazon RoAS (Return on Advertising Spend) is a crucial metric for evaluating the effectiveness of Amazon advertising campaigns. It measures the profitability of ad spending by comparing advertising costs to sales generated. Optimizing RoAS can boost revenue and maximize ROI from Amazon ads.
What is Amazon RoAS?
RoAS calculates the revenue earned per dollar spent on ads. It's calculated by dividing total attributed sales revenue by total ad spend.
For example, if you spend $100 on ads and make $500 in sales, your RoAS is 5 ($500 revenue / $100 ad spend). The higher the RoAS, the more profitable the ads.
How to Calculate Amazon RoAS
Use this simple formula:
RoAS = Total Revenue from Ads / Total Ad Spend
Make sure to factor in:
- Affiliate commissions
- Vendor fees
- In-house costs like staff salaries
And analyze metrics like:
- Clicks and impressions
- Click-through-rate
- Cost Per Click
What is a Good Amazon RoAS?
A good benchmark RoAS is 4:1 or higher. This means $4 in revenue for every $1 in ad spend. However, acceptable RoAS varies based on:
- Profit margins
- Competitiveness
- Product category
- Campaign goals
Continuously optimize campaigns and analyze performance data to improve RoAS over time.
Tips for Increasing Amazon RoAS
- Refine keyword targeting
- Create high-converting ad copy
- Set aggressive bids for top performing keywords
- Analyze search term reports to identify new keywords
Tracking RoAS provides insight into profitability and helps guide campaign optimization. Focus on improving RoAS to maximize returns from Amazon advertising.
Recommended: Does Amazon Have a Return Limit?
FAQs
What is the difference between RoAS and ACoS?
RoAS (Return on Ad Spend) measures profitability by calculating revenue earned per dollar of ad spend. ACoS (Advertising Cost of Sale) measures efficiency by calculating advertising costs per unit sold.
How often should I calculate Amazon RoAS?
Calculate and analyze RoAS at least monthly. More frequent calculations, such as weekly or daily, allow faster optimization. Use advertising dashboards to track real-time performance.
What RoAS ratio is typically successful?
A RoAS of 4:1 or higher is a good benchmark. This means generating $4 in revenue for each $1 in ad spend. However, an acceptable RoAS varies based on factors like profit margins and competitiveness.
How can I increase my Amazon RoAS?
Ways to improve RoAS include refining keyword targeting, creating high-converting ad copy, aggressive bidding on top keywords, and analyzing search term reports to find additional profitable keywords.
Should I pause low RoAS campaigns?
If a campaign's RoAS is below your target for more than 2-3 weeks, consider pausing it and optimizing before resuming. Continually monitor performance and pause consistently unprofitable campaigns.
What other metrics are important besides RoAS?
While RoAS measures profitability, also analyze campaign efficiency metrics like click-through-rate, conversion rate, and cost-per-click. And track overall success metrics like customer acquisition cost and lifetime value.
How can I forecast future RoAS performance?
Analyze historical RoAS data to spot trends and patterns. Factor in changes like new product launches, seasonality, and competition. Build forecast models to estimate future RoAS by campaign, keyword, or product.
