Ep 18: How To Calculate Target ROAS

In today’s quick tip episode, I’m going to explain how you decide what your target ROAS settings should be, if you’re using a smart bidding campaign in Google Ads.

Hey everybody, Jim Lastinger here. Hope everything’s going well for you and your business, and that everyone’s staying healthy and sane during the coronavirus era that we’re living in.

So today we’re going to quickly go through the target ROAS setting in smart bidding campaigns. I’m a big fan of the target ROAS setting, and it works well most of the time. So if you haven’t tested it yet, then definitely put that on your list of things to do. It’s definitely worth a test.

So the way smart bidding works is that you’ll choose whether or not you want to, or when you’re setting up a campaign, you’ll obviously get the list of bidding options that you can use. And you’ll choose whether you want to maximize conversions or maximize conversion value. And usually when you do that, you’ll be given the option to enter a target ROAS. So essentially you’re saying, “I want to get as many conversions as possible at this ROAS.”

So choosing what you want to enter as the ROAS setting depends on your product margins. If you’re only making a 30% margin on each sale, then you definitely need a higher ROAS than you would for product making 60% margin. So you can do the math on that if you want to, but I’ve already done that for you and I’ve created a little calculator tool on my agency site at deepfieldinc.com that you can use to figure out your target ROAS settings. You can get to it at deepfieldinc.com/calculators, and I’ll put a link in the show notes as well, and that’ll help you walk through that calculation. It does all the math for you, even though it’s not very difficult, but I always like to use the tool just to make sure I get it right.

So I recommend starting your campaigns with the target ROAS setting that the calculator gives you. If you get a decent number of conversions and they’re coming in and around that ROAS, then you can start to play with the settings a bit and see if you can increase your sales. Just make sure that you give the algorithm plenty of time to adjust between any setting changes that you make.

That’s it for this quick tip episode, I’ll be back soon with another episode of Marketing in 10. Until then have a great day. Take care.