What is ROAS? Why is it so important?
Many marketers who sell online use their advertised sales volume and sales volume (TURO). they do. However, very few people talk about the advertising expenditures made to reach this TURNOVER. A person with a monthly turnover of 1 million TL may spend 1 million TL again to reach that sales volume. In this case, there is actually a huge ZERO at hand :) Even if we take into account the cost of the product, the business is at a loss. At this point, we come across the concept of ROAS.
It can be translated as "ROAS(Return on ad spend) = Revenue from ad spend" . The formula is as follows 👇🏼
ROAS = Total sales volume/ad spend from ads
Example: If you earn 300 TL for your 100 TL ad spend, your ROAS is 300/100=3.
There is no optimal figure for the amount of ROAS. It can vary from industry to industry and even from product to product. Some brands 3 ROAS While some brands may incur losses under 10 ROAS and below.
Example: A jewelery costing 4000 TL is sold for 6000 TL. The profit from the sale of this jewel is 2000 TL. The budget to be allocated for the advertising expenditure of a product should be a maximum of 2000 TL so that the business does not make any loss from this product. What is the breaking point for this? The breaking point ROAS of the enterprise is 6000/2000=3. The business must maintain its ROAS above 3.
If the Business generates a total turnover of 6000 TL by selling one jewelery out of an advertising expenditure of 3000 TL, the ROAS of the Enterprise will be 6000/3000=2. The business has incurred a loss of 1000 TL in total.
In summary, you should find the minimum ROAS required for your brand to be profitable and keep your ROAS as high as possible from this figure :)