How to Increase ROAS: 5 Proven Strategies to Maximize Ad Spend

To increase return on ad spend (ROAS), marketers should refine their targeting, optimize ad spend, leverage ad assets, and implement landing page optimization. Learn how to increase ROAS through these proven strategies.

When it comes to pay-per-click (PPC) marketing campaigns, digital marketers rely on performance metrics to assess campaign success and guide optimization decisions.

One of the most important metrics? Return on ad spend (ROAS).

ROAS measures how much revenue your ads generate for every dollar spent — making it a critical indicator of campaign performance across platforms like Google Ads and Facebook Ads.

5 ways to increase ROAS

The strategies you employ to increase ROAS will depend on the type of campaigns you’re running, your industry niche, and your overall marketing goals.

While not every strategy may apply to every business, here are our top steps to see an increase in your average ROAS.

1. Adjust your targeting
2. Optimize ad spend
3. Leverage ad assets
4. Implement landing page optimization
5. Focus on lifetime value (CLV)

1. Adjust your targeting

Audience targeting allows you to show your ads to specific groups or audience segments (a subgroup within a larger audience).

By refining your targeting, you prevent wasted spend on users unlikely to convert and focus your budget on high-intent audiences.

Segment your audience based on:

• Demographics
• Interests
• Purchase history
• Behaviors

Then tailor your ad copy, images, and calls to action (CTAs) to match the interests and needs of that specific audience.

Why this improves ROAS: More relevant traffic leads to higher conversion rates and lower wasted spend.

Common Google Ads audience types include:

• Affinity audiences represent people with particular interests in products or niches similar to your brand. These audiences are determined by Google based on website history.
• Remarketing campaigns re-engage users who have previously interacted with your website or shown interest in your products or services. These ads are particularly helpful for ecommerce businesses to reduce cart abandonment.
• Demographic targeting includes age, gender, parental status, and household income. This information is predicted by Google from online behaviors, account settings, and social media activity.

Pro tip: For Facebook Ads, lookalike audiences help to capture more potential customers who share attributes with your existing customers.

2. Optimize ad spend

Improving ROAS often starts with reallocating budget more efficiently.

Here are some of the key strategies to consider.

• Test bidding strategies: After accumulating enough data through manual bidding, test different bidding strategies (such as automated bidding or target ROAS bidding) to find the most effective approach for your campaigns.
• Pause underperforming ads: Direct your budget toward high-performers.
• Improve Quality Score: Quality Score impacts ad performance and determines ad rank. Improving your QS can lower cost per click (CPC) and boost your ROAS.
• A/B test creative: Continuously test and refine your ad copy to improve click-through rates (CTR) and conversion rates. Experiment with different headlines, descriptions, and CTAs to find what messaging resonates best with your audience.
• Use ad scheduling: For some businesses, limiting ads to peak times when audiences are most active can cut costs and increase the likelihood of conversions.
• Update your keyword list: Review and update your keyword list (including negative keywords) to include new opportunities and exclude irrelevant terms.

3. Leverage ad assets

Previously called extensions, ad assets can improve ad visibility, provide additional information, and offer more opportunities for users to engage with your ads.

Common asset types include:

• Sitelinks
• Structured snippets
• Calls
• Pricing
• Locations
• Promotions
• App assets
• Lead forms
• Images

Using relevant assets can improve CTR and Quality Score, ultimately driving stronger ROAS.

Further reading: 11 Google Assets: How to Set Them Up (+Examples and Tips)

More relevant traffic leads to higher conversion rates and lower wasted spend. (Image: Adobe Stock)

4. Implement landing page optimization

Landing page optimization improves a webpage’s design and messaging to achieve more conversions.

Best practices include:

• Clear and concise messaging
• One CTA (with multiple buttons)
• Real photos (not stock images)
• Intuitive design for better user experience
• Easy form fills
• Message match between ads and landing pages
• Social proof
• Visible contact information
• Fast page load time
• Mobile responsiveness

Further reading: How to Do Landing Page Optimization Like a Pro: 15 Tips

5. Focus on customer lifetime value (CLV)

If you have a loyal customer base that makes repeat purchases or subscribes long-term, your short-term ROAS calculations may not tell the entire story.

Customer lifetime value (CLV) measures the total amount of revenue a customer generates over time.

A higher CLV may justify higher acquisition costs — even if short-term ROAS appears lower as a result.

Prioritize and target high CLV customers and invest in retention campaigns to maximize their value, ultimately contributing to a higher ROAS over time.

Further reading: Customer Lifetime Value: What You Need to Know

What is ROAS?

ROAS is a marketing metric that shows how much revenue is generated from every dollar invested in ad campaigns.

A higher ROAS generally indicates more efficient ad spend.

Analyzing this metric allows you to evaluate the performance of your campaigns across search engines and social media and optimize your budget for maximum return.

How to calculate ROAS

Calculating ROAS involves dividing the revenue generated from ads by the amount spent on the ad campaign:

ROAS = Revenue from Advertising / Advertising Spend

(Image: HawkSEM)

This can be shown as a ratio, percentage, or dollar value.

What is a “good” ROAS?

Some businesses consider 200% a good ROAS, while others reach closer to 400%.

To determine if your ROAS is desirable, there are considerations such as your industry, marketing objectives, business model, and profit margins.

For example, if your primary objective is to maximize revenue and profitability, a high ROAS may be desired.

Alternatively, if your goal is customer acquisition or to increase brand awareness, a lower ROAS may be acceptable initially with the expectation of longer-term benefits.

Industry standards for ROAS can vary significantly across different sectors. Researching industry-specific benchmarks can help you gauge whether your ROAS is competitive within your niche.

Ultimately, what qualifies as a good ROAS depends on your specific circumstances, objectives, and expectations.

What ROAS is not

By understanding what ROAS is not, you can avoid misinterpretations and ensure that you’re using this metric effectively along with other key metrics and within the broader context of your marketing and business objectives.

ROAS ≠ ROI

While ROAS measures the revenue generated from advertising spend, return on investment (ROI) takes into account all costs associated with an investment, not just ad spend.

ROI typically considers factors like overhead costs, production costs, and other expenses beyond advertising.

ROAS ≠ profitability

ROAS indicates how effectively your advertising spend is driving revenue, but it doesn’t directly reflect profitability.

Profitability involves considering all costs and expenses associated with a business, not just advertising spend. To assess profitability accurately, you need to subtract all costs from the total revenue generated, not just advertising costs.

ROAS ≠ a standalone metric

While ROAS is a valuable metric for assessing the performance of your digital advertising campaigns, it should be analyzed alongside other key performance indicators (KPIs) such as conversion rate, customer lifetime value (CLV), cost-per-click (CPC), and customer retention rate.

These metrics provide additional context and insights into the overall effectiveness and efficiency of your marketing efforts.

ROAS ≠ static

ROAS can vary over time due to factors such as seasonality, changes in market conditions, competitive landscape, and adjustments to advertising strategies.

It’s essential to monitor ROAS regularly and adapt your tactics accordingly to maintain and/or improve performance.

ROAS ≠ a substitute for understanding customer behavior

While ROAS provides insights into the revenue generated from advertising efforts, it doesn’t provide direct insights into customer behavior, preferences, or satisfaction.

To understand your customers better, you may need to conduct additional research, gather feedback, and analyze data from sources beyond ROAS.

When to optimize your ROAS strategy: 7 scenarios

Knowing when it’s time to create a strategy to improve your ROAS involves monitoring KPIs and recognizing signs that indicate your current advertising efforts may not be delivering the desired results.

Here are some indicators that suggest it’s time to develop a strategy to improve your ROAS:

1. Declining ROAS

If you notice a low ROAS over time, it’s a clear sign that your advertising campaigns may not be as effective as they once were.

This could be due to various factors such as increased competition, changes in consumer behavior, or inefficiencies in your marketing strategies.

2. High cost per acquisition (CPA)

A rising cost per acquisition indicates that you’re spending more to acquire each customer or conversion.

If your CPA is increasing while your ROAS is decreasing or remaining stagnant, it’s a strong indicator that your advertising efficiency is declining, and you need to take action to improve it.

3. Stagnant (or declining) conversion rates

If your conversion rates are stagnating or declining despite consistent ad spend, it suggests that your ads may not be resonating with your target audience or effectively driving them to take action.

Poor conversion rates can negatively impact your ROAS and require adjustments to your advertising strategy.

4. Inefficient budget

If you’re spending a significant portion of your advertising budget without seeing returns, it’s a sign that your campaigns may not be optimized for efficiency.

Identifying areas of overspending or inefficiency can help you reallocate resources to activities that drive better results and improve ROAS.

5. Competitive pressure

Increased competition in your industry or advertising space can impact your ROAS by driving up advertising costs or making it harder to reach and convert your target audience.

If you’re facing heightened competition, it may be time to reassess your advertising strategy and find ways to differentiate your brand and campaigns to maintain or improve ROAS.

6. Seasonal variations

Seasonal fluctuations in consumer demand or market conditions can affect ROAS.

If you notice significant changes in performance during specific periods, it’s time to adapt your advertising strategies accordingly. This can help maximize ROAS during peak times and mitigate declines during off-peak periods.

7. Changes in platform algorithms or policies

Updates to advertising platforms’ algorithms, policies, or features can impact the performance of your campaigns and ROAS.

Stay informed about any changes to advertising platforms and adjust your strategies to align with new requirements or opportunities for optimization.

The takeaway

When increasing ROAS is a top priority, there are steps you can take to maximize each advertising dollar spent.

And while investing in conversion rate optimization (CRO) and retargeting campaigns are smart strategies to implement, don’t forget to look at the bigger picture: how much a customer is worth to your business long-term.

Sometimes, a ROAS calculation doesn’t account for the true long-term value of a conversion.

Need an extra hand to increase your ROAS? Reach out to HawkSEM to see your revenue soar.

This article has been updated and was originally published in April 2024.