Why is it important to know digital marketing metrics to measure on Amazon? Marketing metrics give you a clue whether your campaign is achieving the KPIs set earlier or not. Metrics like ROAS and ROI allow you to take the best action to adjust your campaign and make it perform as you wish. Thanks to metrics, you can understand if your campaign strategy is a success!
What is ROAS?
ROAS stands for “return on advertising investment”. ROAS can help you determine the efficiency of your Amazon advertising campaigns by calculating the amount of money your company earns for every euro it spends on advertising. In other words, this reflects the profitability of your campaign.
The formula for calculating ROAS is dividing income by investment and multiplying the result by 100.
ROAS = (SALES REVENUE / EXPENSES)*100
Example: Let’s imagine that thanks to a campaign on Amazon for the sale of T-shirts we have obtained a total sales revenue of 10,000 euros per month and that we have had to invest about 2,500 euros per month. With this data the return on advertising investment would be:
ROAS = (10000 / 2500)*100
This means that for every euro invested in advertising, the return is 5 euros and the percentage of income obtained is 400%.
Why is it important?
With ROAS you will be able to make effective decisions about where and how you can invest your money in your Amazon advertising campaigns. A good understanding of the return on advertising investment of your campaigns can help you:
- Define and establish a better budget for future campaigns.
- Create strategies that convert more customers.
- Be more aware of where to invest the advertising budget and how to do it.
ROAS and ROI: Differences
The ROAS metric is very similar to another marketing metric, the Roi or return on investment.
The ROI is a metric that gives us the percentage of profitability on the investment made. The formula for calculating ROI is as follows:
ROI= ((REVENUES – EXPENSES)/EXPENDITURES)* 100
The main difference is that ROAS gives us a ratio that is calculated by comparing the amount earned and the amount spent, while ROI takes into account the amount earned once expenses have been subtracted. ROI measures earnings while ROAS measures the gross revenue generated for each euro spent on advertising.
In addition, ROI has a broader sphere of interest, because it also takes into account other expenses. By that we mean production costs, shipping costs, etc. For this reason, ROI provides us with a clearer and sharper mirror of existing profits. ROAS, on the other hand, refers to a specific case, to a single marketing campaign.
This is the end of our lesson on “What is ROAS and Why is it Important? If you have doubts or want to deepen in some aspects ask us with a comment. To not miss other content from Epinium University, subscribe to the Newsletter.