Calculate Your Amazon ROAS With This Simple Formula
Updated April 20, 2023.
Are you keeping track of your Return on Ad Spend (ROAS)? If your answer is "no", you may be one of many business owners who find working with formulas daunting and complicated—in the end, making a loss without even knowing about it. A good e-commerce ROAS and customer retention are critical to the success of your business, because it ensures your advertising efforts and the consequent results are not mismatched.
In this short article, we'll take you through the formula, with an accompanying example, so that you can start evaluating the success of your advertising campaigns.
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Formula
By following this straightforward formula, you'll easily be able to calculate your business's ROAS:
ROAS =
Revenue from Ad Spend / Cost of Ad Spend
- Revenue from Ad Spend—The amount of money you made (revenue) from an advertising campaign.
- Cost of Ad Spend—The total cost of the advertising campaign.
Example
Let's say you have an e-commerce sneaker store, and you've just launched a new brand of sneakers. You spent $2,000 on your launch advertising campaign and it resulted in $6,000 in revenue. Your ROAS would be calculated as follows:
ROAS = $6,000 / $2,000
= 3x
ROAS can also be referred to as $3 or 300%. It represents a 3:1 ratio which means that for every dollar you allocated to your advertising campaign, you generated $3 in revenue.
» Curious about other Amazon metrics? Use these steps to check Amazon sales data
In Closing...
In general, an Amazon ROAS of 3 or more is seen as good. However, this is simply a benchmark and depends on other factors too, like your industry and profit margin. If you have a higher profit margin, then you can operate with a lower ROAS. Similarly, a small profit margin needs a higher ROAS, so you keep advertising costs down.
The good news is that there are many techniques for optimizing your ROAS. With the BeProfit solution, you'll be able to streamline your tracking analysis process to get to the root of what is working for your business and what is not. These key insights will help you develop more effective advertising campaigns over time, and as a result, boost sales and revenue.
