Return on Ad Spend (ROAS) is often viewed as the most important metric for digital advertising campaigns. ROAS helps businesses evaluate the efficiency of their ad campaigns and ensure they're getting a strong enough return. But when it comes to Facebook Ads, what exactly constitutes a "good" ROAS?
What is ROAS?
Before we delve into specific numbers, it's crucial to understand what ROAS means. At its core, ROAS represents the amount of revenue generated for every dollar spent on advertising. The formula to calculate ROAS is simple:
ROAS = Revenue attributed to Ad Campaign / Cost of Ad Campaign
For instance, if you spent $100 on an ad campaign and it generated $400 in revenue, your ROAS would be 4:1 or 400% or commonly communicated as a 4X ROAS.
The "Good" ROAS for Facebook Ads
Determining a good ROAS can be subjective, as it largely depends on industry benchmarks, the specific goals of your campaign, and your profit margins. However, many marketers and advertisers consider a ROAS of 4:1 (or 400%) to be a good benchmark. This means that for every dollar spent, you'd ideally like to see four dollars in return.
That said, it's worth noting the following:
Industry Variances
Some industries naturally have higher ROAS due to factors like higher average order values or profit margins. For instance, the luxury goods industry may see higher ROAS than the fast fashion sector.
Business Objectives
If your primary goal is brand awareness or capturing leads rather than immediate sales, you may be satisfied with a lower ROAS.
Profit Margins
A business with high-profit margins might be content with a lower ROAS, as they still make a significant profit. Conversely, those with thinner margins might need a higher ROAS to ensure profitability.
Competition
A business with a ton of industry competitors may have to bid higher than the average business on ad inventory. This can result in a lower ROAS, due to the cost of aggressively securing a significant share of voice.
How to Improve Your Facebook Ads ROAS
If you're not hitting that desired 4:1 benchmark (or whatever your target may be), consider the following strategies:
Audience Targeting
Refine your target audience to ensure your ads are reaching the people most likely to convert. On the flip side, make sure your audiences aren’t too narrow. You need to give Facebook plenty of opportunities to serve your ad.
Ad Creative
Continually test and optimize your ad visuals and copy. A compelling ad can make all the difference in driving conversions.
Landing Page Optimization
Ensure that the landing page you're directing traffic to is optimized for conversions. This includes clear CTAs, an intuitive layout, and compelling content.
Landing Page Relevance
Make sure that the products or services on your landing pages match the ads that you are running. Matching your ad, landing page and the intent of your audience results in higher conversion rates.
Retargeting Campaigns
Leverage Facebook's retargeting capabilities to reach users who've already shown interest in your product or service.
Selecting The Right Objective
If you are trying to drive sales, you need to ensure your website pixel is tracking purchases and revenue data - otherwise Facebook won’t have the opportunity to recognize and optimize towards sales.
Consider Your Business’ Needs First
A "good" ROAS for Facebook Ads typically hovers around the 4:1 ratio, but it's essential to consider your business's specific circumstances and objectives. Continually monitor, adjust, and optimize your campaigns to achieve the best possible ROAS for your advertising efforts. Remember, a successful advertising campaign doesn't just look at return on investment but also the overall growth and health of your business.
Work With the Right Partners
If you don’t have the time to learn the Meta Ads Manager and Business Manager, where Facebook Ads are ran, you need to make sure someone on your team is equipped to do so. They are constantly changing things inside of the platform that are important to stay on top of.
You may need to consider hiring an agency. Here are 5 criteria you should judge potential agency candidates on. Good candidates will:
Have a proven track record and strong case studies.
Have a “whole business” mindset to help you understand the full picture.
Have open and timely communication.
Have people who fit well into your company culture.
Have the ability to deliver on promises early or on-time.
At High Beam Marketing, we average over a 6:1 or 6x ROAS for clients on Facebook ad campaigns. We’d love to schedule a discovery call with you to see if your business qualifies for a FREE Facebook Ad audit, where we perform a comprehensive analysis of your account’s setup and performance.
If that sounds like something you could benefit from, click the button and fill out our contact form!