ROAS (Return On Ad Spend)

Technical Definition

ROAS, or Return On Ad Spend, measures the revenue generated for every dollar spent on advertising. ROAS is expressed as the number of dollars earned for every $1 spent on ad budget to evaluate the revenue generated by a marketing campaign.

Why Does This Matter to You, the Retailer?

Understanding your ROAS helps determine if your advertising budget is being used effectively. A high ROAS means you’re getting a good return on your ad investment, while a low ROAS might indicate that changes to the campaign are needed. Essentially, it’s a key indicator of your marketing’s profitability.

Many agencies aim for a ROAS of 3, which sounds pretty good because it means you earned $3 from each $1 spent. However, when a brick and mortar store owner factors in the cost of products, staff, rent, shipping, etc., they are actually losing money with each sales if they are earning a ROAS of 3. 

Example In a Sentence

“After analyzing our campaign, we were thrilled to see a ROAS of 6, meaning for every dollar we spent on advertising, we brought in six dollars in sales.”