Definition
ROAS (return on ad spend) relates the revenue attributed to a campaign to what it cost. It reads in euros of sales per euro spent, or as a percentage.
It ignores margin. The break-even ROAS is 1 divided by the margin rate: with a 40% margin, you need a ROAS of 2.5 before earning the first euro.
Value for a business owner
ROAS is used to choose between campaigns and to set a bidding goal, since Google Ads can bid on a target ROAS. Read against margin and acquisition cost, it tells whether a campaign creates value or destroys it.
At Stratedge Consulting
The ad budget calculator computes ROAS from your own figures, with the budget required and the cost per enquiry. See also the Online advertising page.
Common mistakes
Comparing ROAS across businesses with different margins. A ROAS of 3 is comfortable with a 60% margin and loses money with 25%.
Judging a campaign on the first sale alone. A client who comes back three times is worth more than their first order; lifetime value completes the reading.