33.8 C
Chennai
May 6, 2024
How ToSocial Media Marketing

How to Calculate Return on Ad Spends for Social Media?

How to calculate return on ad spend

Social media is one of the most attractive advertisement platforms for a brand. so it is essential to estimate the return on ads on social media. ROAS refers to the amount of revenue earned on every dollar($) spent on the advertisement campaign. The ROAS is a key indicator of the performance of a brand, the ratio profitability of your social media advertising campaign generated in terms of the dollar amount. The ROAS calculator makes it simple for us and we only need to enter our annual profitability and the amount we have spent on the advertisement and marketing for our brand. The ROAS measurement provides us with a simple estimation of how a brand is performing and what are its prospects. When a brand shows consistent profitability of ROAS then it means it is performing impressively.

Why ROAS is so Important?

Calculating ROAS is essential for measuring a brand’s performance in any market. ROAS finance is a key indicator of a brand generating profitability in all four Pillars of Marketing Product, Price, Place, and Promotion. If a company is generating profitability it means it has produced a product that is according to the demand of the marketplace or the target market. The brand has settled on the best price of the product, so the consumers are buying the product or the service.

The third critical element is the place if a brand reflects better ROAS measurement when measured by the ROAS calculator by calculator-online.net. Then it means the brand can provide the product or survive at the right place and at an appropriate price. The last element of the marketing plan is a promotion which is directly related to ROAS(Return on Advertising). 

How can we measure ROAS?

The ROAS can be measured by dividing the Total Revenue Earned by the total dollar invested in the advertisement comparing. 

ROAS Formula = (Revenue generated from the Ads / Cost of Ads) x 100

Where the Revenue attributable to the Ads is the revenues a brand generates in return by investing in the ads. We are converting the ratio in terms of percentages with the ROAS calculator. So we are multiplying the result by 100. Normally the ratio of 4:1 is considered better for a brand, and we consider a brand to perform better. If the ratio is less than this it means the brand is not performing better and needs to improve its product and service. When you can find the precise return from the advertisements. Then you can compare what you are investing in your advertisements and what is your return from the advertisements campaign. In our time it is quite critical to know the total investments in digital marketing.

ROAS Example:

Consider a brand investing $1000 in advertisements, and the brand is able to generate $5000 of revenue from the advertising efforts. Then what are the ROAS profitability and the ratio of the brand?

Solution

Revenue generated by the advertisement= is $5000 

Investment has done on the advertisement= $1000

The Return on Ad Spend Formula

ROAS Formula = (Revenue generated from the Ads / Cost of Ads) x 100

ROAS = ($5000 / $1000) x 100

ROAS =500%

The Total Return on Investment=4000 ($)

ROAS Ratio = Revenue attributable to the Ads: Cost of Ads

ROAS Ratio = $5000:$1000

ROAS Ratio = 5: 1

The ROAS calculator online makes it simple for us and we only need to enter our annual profitability

Break-even and ROAS:

Calculating ROAS is also essential to find the Break Even analysis, companies do the ROAS measurement to find if they have crossed the Break Even Point. The Break Even Point is a point when a brand has generated profitability more than its investment. After Break Even Point the brand is generating pure profitability which is one of the KEY indicators of brand performance. The return on advertising spend formula calculator turns it simple for us and we only need to enter our annual profitability

Conclusion:

The ROAS is a key indicator of a brand’s performance in the marketplace, and how it performs as compared to its competitors. If a brand is able to generate a better ROAS ratio, then it means the brand can generate consistent profits. Digital marketing has increased the importance of the ROAS, as we normally going to use digital media for advertising and marketing our products and services.

Related posts

7 Effective Tactics to Get More Leads on Social Media

Sonia Martin