How to get the best ROAS for your business

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Written by: Ian Haponiev (Content Specialist at Vision Effect)

In the world of digital marketing, a healthy ROAS (return on advertising spend) is one of the most commonly used metrics of a successful marketing campaign. In today’s blog, we’ll look at how ROAS features and should be considered in an efficient marketing strategy.

Let’s start with an example, a small start-up company that is operating an e-shop in the beauty sphere. This company produces premium hair care products that they sell exclusively online. As a start-up, they do not have a massive digital marketing budget that they can spend each month, while their competitors in that space are spending outrageous amounts. Just look at beauty industry monolith L’Oreal as an example – last year, they spent 10.59 billion Euros internationally on marketing and promotions.

It must be said that even the smartest of digital marketing strategies is not going to make our start-up a direct competitor by the end of the fiscal year, but there are plenty of ways they can get a slice of that pie. After all, the beauty market globally is worth well over half a trillion dollars, so there’s plenty of cash to go around. The key part of strategy here is to be smart.


Incredibly large and famous corporations with inflated budgets often do not need to worry about the intricacies of digital marketing for two main reasons: firstly, because they can simply throw enough money at the wall to get a decent return on their advertising spend (ROAS). Secondly, they’re already a massive name in their industry and have great brand recognition. Both of these factors can cause a company to coast but at the same time, multinationals worth billions expect results from their marketing department.

A quick google search here in our digital marketing agency office in Rethymno, Crete gave me sponsored ads for a few different brands when I entered the key search term ‘Best shampoo’. L’Oreal isn’t to be found, however, the two most prominently featured companies who are paying for this sponsored search are both worth approximately 15 billion dollars.

So what does this tell about marketing and strategy? From L’Oreal’s perspective, it’s likely that they’ve determined that ‘best shampoo’ is too costly to bid for as a search term. After all, the average shampoo listed in the Google Ads costs around 40-55 euros per bottle, implying that the cost per acquisition (CPA) is high. For those not in the know, cost per acquisition (CPA) is how much money you spend on advertising per sale, so naturally you want your CPA to be as low as possible, as it means that you have optimised your advertising spend.

For a multi-billion dollar industry that is as competitive as hair care, you’d have to sell an incredibly high number of units to cover the cost of bidding on an expensive search term, which is why we don’t see any shampoo for under 25 euros per bottle in the sponsored section. So what kind of digital marketing strategy should our small start-up adopt?

Be Smart with Search Terms

When your budget isn’t that big, you (or the company that takes care of your digital marketing) need to think outside the box and do some research when it comes to Google Ad campaigns. With regards to search terms, the exact blend you’re looking for is a combination of words or phrases that are used with some regularity, describe your product, service or company accurately and most importantly, have not been targeted by your competitors yet.

Search Terms

Choose the Right Platform

With Google Ads being such a well-known and ubiquitous advertising platform, it might be the case that the industry in which you operate is too saturated for you to be able to compete there on a cost-effective basis. Thankfully, Google Ad campaigns are not the be-all and end-all of digital marketing; there are plenty of different options to choose from and millions of people to be reached elsewhere.

Get Customers

If you’re struggling with an overly competitive market, the first course of action is to analyse your existing client base. If there is a particular demographic that stands out, it makes sense to build your digital marketing strategy around them. For example, if many of your clients are females over 40, it would probably be worth advertising on a social media site like Pinterest, as this platform’s user base strongly favours this demographic.

Consider Both the Short and Long Term

Start-ups require a lot of planning and business owners need to have the ‘now’ and the future in mind, in order to operate a company that can look after itself in the short term, but grow in the long term. Short term goals are largely designed around immediate cash flow; if you operate an e-shop, for example, you want to make enough sales to pay your bills, suppliers and other expenses, so you can stay afloat. Long term, however, your strategy needs to be focused on growth.

If we look back at the aforementioned cost per acquisition (CPA), it can be viewed differently through the prisms of short or long term strategy. For a company that operates in haircare, it’s always easier to sell your products with a discount (as almost sixty percent of people pay attention to them) but at a vastly reduced price point, are you selling to the right customer?

What I mean by this, is that when the price is low enough, you’re broadening your sales funnel to attract people who wouldn’t normally pay full price for your product. While that may sound good, it’s not in terms of the lifetime value of this customer. A higher initial CPA for a customer that is prepared to spend that much on your product is often much more preferable, as they are likely to be repeat customers.

Let’s take a deeper dive into this concept.

Target the Right Customer

Let’s take a look at this in action. Customer A sees your advertisement for a sale and buys one of your products at a 50% discount. The CPA was 10 euros, and the value of their purchase was 15 euros. You’re in profit, great. However, this sale only converted because of the low price point; they will not buy this product again unless it’s discounted at a similar rate and you don’t want to be selling your products at 50% off very often if at all.

Customer B is your target demographic and it costs you 30 Euros to acquire them. Your sales data shows that your average customer in this bracket will make at least 3 purchases, regardless of pricing. Customer A’s lifetime value is likely to be 5 euros (€15 Sales minus €10 CPA). Customer B’s lifetime value is likely to be at least €60 (€90 in Sales minus €30 CPA). The difference here is clear and we’re not even factoring in the margins you make per unit. In any case, the old adage here is correct; sometimes you have to spend money to make money.

Scale Up When The Time is Right

All businesses want to grow, sure, but just as important is to ensure that your growth is planned carefully, natural and managed sustainably. There’s no shortage of stories about companies that crested a wave of popularity, grew too quickly and eventually went bankrupt due to the decisions they made and risks they took. At the same time, there will be plenty of businesses that have not reached their potential because they were too conservative with their advertising and marketing spend. So how do we find the happy medium here?

Strategy and Data Analysis

The short answer is data analysis and experience. By analysing your existing campaigns properly, you will be able to see which ads are working and which aren’t. If you’re converting sales at an affordable rate, it’s time to think about increasing your spend – but pay close attention to the base numbers. Your cash flow needs to cover the increase in advertising spend but you should also be prepared for mixed results.

If you’re getting a ROAS of 3 (three euros in for every 1 euro out) at one level of advertising spend, it does not mean that you’ll still be hitting that figure when you increase your budget. Due to each platform keeping the minutiae of their algorithms a secret, it’s just not as simple as that. Consequently, scaling up should be gradual and carefully planned from month to month, so you can see the results of the changes in ad spend and react to them accordingly.

There are many different factors to consider when compiling an effective digital marketing strategy, so if you’re unsure about what would work best for you, contact us today for a consultation and we’ll discuss how we can boost your business!