Target ROAS Calculator

Target ROAS calculator helps you evaluate targeted return on ad spend, a key metric that indicates the estimated effectiveness of marketing efforts. This target ROAS calculator helps in simply getting an idea of the targeted returns expected so that the user can evaluate actual performance against target performance.

Why is it important to calculate Target ROAS?
  • It helps in setting a smart bidding strategy to achieve more conversion value.
  • It helps in evaluating to make the paid campaigns more effective.
  • It optimizes on conversion value and not just conversion volume.
  • Target ROAS allows you to set a ROAS goal for campaigns, ad groups, and keywords or products.
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What is Target Return on Ad Spend?

Target ROAS is the average conversion value expected to get for each dollar you spend on ads.

How to Calculate Target ROAS?

Target ROAS is calculated by dividing 1 upon average profit margin as a percentage of revenue multiplied by the percentage of that margin you’re willing to invest in acquisition.

What is a good target ROAS percentage?

There is no straightforward way to calculate Good Target ROAS by any particular industry because it largely depends on how much has been spent on ads and how much has been earned from the ads.

 

However the general benchmark in terms of ROAS would be 2:1 which implies earning twice the amount for the expenditure incurred.

What does a 300% ROAS mean?

300% ROAS is 3 times the return on the amount spent for the ads. This does not imply 3 times profit.

Supposingly, you have spent 100 INR on Advertising. Now you have 200 INR Left. Let’s say your product costs 100 INR and all other shipping and packaging expenses with other overheads come to about 70 INR.So the profit you will make is 30 INR.

 

Hence there is a difference between Return on ad spent and the Final Profit earned.

How to use this target ROAS calculator?

Firstly, calculate your average profit margin as a percentage of revenue. For your margin calculation, don’t include costs that don’t change when selling additional products, like salaries and rent. The margin here should be based on variable product-related costs such as cost of goods, fulfilment, commissions, etc.

 

Then calculate the percentage of that margin you’re willing to invest in acquisition. Insert both the values and you will get your final result i.e. your Target ROAS.

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