What is ROI (Return on investment) and why is it important?
Return on investment (ROI) is an indicator that helps measure the effectiveness and profitability of advertising campaigns. The ROI shows how much revenue the campaign generated compared to the advertising budget invested. ROI is calculated using the following formula:
ROI = (Revenue from advertising - Advertising cost) / Advertising cost
A higher ROI means a more effective and profitable advertising campaign. For webshop owners, ROI helps them decide which ad campaigns are working well and which ones should be optimised or stopped.
What is ROAS (Return on Ad Spend) and why is it important?
ROAS (Return on Ad Spend) is an indicator of the revenue generated from each ad spend. This indicator is similar to the return on investment (ROI) but focuses specifically on the advertising budget.
ROAS = Revenue from advertising / Advertising cost
With ROAS, online store owners can easily compare the effectiveness of different advertising campaigns and determine which one will generate the most revenue for the invested budget.
Why is it important for you to know ROI and ROAS?
Knowledge of ROI and ROAS is essential for webshop owners for the following reasons:
Spending efficiency: with ROI and ROAS, e-commerce owners can determine which advertising campaigns are delivering the best results, so they can focus on those that will deliver the highest revenue and the best return on investment.
Optimisation: continuous analysis and optimisation of advertising campaigns is essential for successful marketing. Tracking ROI and ROAS values allows webshop owners to detect changes in ad performance in time and adjust their strategy if necessary.
In-depth analysis: comparing ROI and ROAS values across different advertising platforms and time periods allows shop owners a better understanding of which advertising platforms work best for their business and how advertising results evolve over time.
No ceiling on advertising costs as long as ROAS is appropriate
Knowing the ROI and ROAS values not only helps you measure the effectiveness of your advertising campaigns, but also helps you set a ceiling for advertising costs. In theory, if the ROAS of a campaign is right for you, then there is no upper limit to advertising costs, as the money invested will continue to generate a profit even as the budget is increased.
However, it is important to bear in mind that increasing advertising costs does not always lead to a proportionate increase in revenue. Advertising performance and ROAS may change over time, for example due to increased competition, audience attrition or a decrease in the effectiveness of advertising creatives. That's why you need to constantly monitor ROAS and ad performance as you increase your ad spend.
The following steps are suggested to effectively manage advertising costs while taking ROAS into account:
Testing and scaling: incremental increases in advertising costs and analysis of changes in performance will help you find the optimal advertising cost that will result in the best ROAS.
Segmentation and targeting: detailed segmentation and targeting of the target audience allows webshop owners to create more specific ads that better match the needs and interests of their customers, thereby increasing ROAS value.
Updating ad creatives: constantly updating ad creatives and testing new concepts allows shop owners to find the best performing ads and maintain high ROAS.
Facebook and Instagram posts, post highlighting can be used to create campaigns with good ROAS values
Facebook and Instagram are two popular social media platforms that offer a wide range of advertising opportunities for businesses. By using posts and post highlights, e-commerce owners can display targeted ads to the right audience, which can result in good ROAS.
Post highlighting on Facebook and Instagram is a form of advertising where existing organic posts are supported with advertising budgets to give your business more reach and visibility. The following tips can help you create campaigns with good ROAS values using posts and post highlights:
Choosing the best posts: before highlighting posts, it is worth analysing the performance of previous organic posts and selecting those that generated the highest interactions and conversions. This will increase the chances that the featured posts will also deliver good ROAS.
Targeting and segmentation: you can increase the effectiveness of posts and post highlights by segmenting and targeting your audience in detail. This ensures that ads are displayed to the most relevant users, which improves ROAS.
Appropriate budget and timing: the budget and timing of posts and post highlights should be optimised to achieve the best results. Try different budget and timing settings to find the combination that produces the best ROAS.
Measurement and optimisation: the performance of posts and post highlights should be continuously measured and analysed to identify the areas where improvement is needed. By analysing the results andtaking optimisationsteps, we can improve the effectiveness of advertising campaigns and increase ROAS.
Creative elements and messages: the effectiveness of posts and post highlights is greatly influenced by the relevance of the creative content and messages. Ensure that posts contain compelling visual elements, interesting and compelling messages that capture the interest of the target audience and drive conversions.
Facebook and Instagram posts and post highlights can therefore be used to create campaigns with good ROAS values, provided that you use the tools and opportunities available to you. To achieve success, we need to constantly measure, analyse and optimise our ads, adapting to changing market conditions and audience needs.
How can you optimise your posts' visibility on a return on investment basis in the most efficient way?
As is usually the case with performance-based marketing, the law of large numbers applies. The more posts you try to test, the more likely it is that one of them will perform much better than the others because of the text and imagery of the post. Simply by generating more interest, the text or image will produce better results. That's why it's worth testing all your posts to see which one will ultimately bring the highest return on investment.
Of course, we also know that highlighting posts one by one and launching them as ads to multiple test audiences can be a crazy amount of work, especially if you post every day or two and want to test 4-5 audiences, plus retarget and possibly retention groups, you can easily end up having to launch a post up to 8 times in different campaigns as an ad.
And that's where Infinite∞Ad comes to the rescue with its ability to launch ads to an infinite number of target audiences based on preset rules the moment you post them on your Facebook or Instagram wall, and then monitor the countless ads and stop poorly performing, low-return posts.
If you want to automatically launch and manage your posts yourself, and get unprecedented ROI without having to manually adjust your ads every time, all you have to do is book an appointment using the links below or sign up to try Infinite∞Ad for free.
