Anyone who works in digital marketing knows that, in order to define the best strategy, it is necessary to analyze the return that investments bring to the company. Therefore, it is important to understand more about ROI and ROAS metrics and know how to calculate each one.
To help you, we have gathered everything you need to know about them in this article. Follow along!
Understand what ROI and ROAS are for
Knowing how to analyze the return that a campaign’s investments are generating for a business is essential to measuring its success. After all, anything that is measured can be improved, right?
For this reason, it is important to know how to evaluate and calculate the metrics mentioned above. With them, it will be easier to know whether the application made is bringing good results for the brand.
ROI stands for Return Over Investment. As the name suggests, it measures the value that investments made are bringing to the company. In other words, it is a calculation between the money earned and the money invested in a project.
Widely used by marketing professionals, this metric offers a more general view of the business, as it measures the profit or loss of an action.
ROAS stands for Return on Advertising Spend , that is, Return on Investment in Advertising. Thus, it measures the entire cost involved in a specific advertising campaign.
This indicator is essential for the marketing sector, as it makes it possible to monitor whether an advertising campaign is having any results. To do this, all channels used for its dissemination can be analyzed: blog , email, social networks, paid media, among others.
This makes it easier to assess which channels are bringing positive repercussions to the brand. If any of them are not paying off, the strategy can be reevaluated.
As you can see, the metrics are quite similar. The problem is that while the first is used to evaluate the overall return on marketing, the second is applied to specific advertising campaigns.
Because they monitor different parameters, it is recommended to integrate them and use them together. In this way, it is possible to know what percentage of the total return the campaigns represent.
How to calculate ROI and ROAS?
Now that you understand the importance of analyzing both metrics, it’s time to learn how to calculate them. Check it out!
ROAS
To calculate ROAS, you must use the formula:
ROAS = (revenue – cost) / cost
Revenue is the amount of money a company makes through the advertising greece phone number data campaign being analyzed. For example, if you're analyzing ROAS for an ad set, revenue is the amount of money received from that sales channel alone.
The cost will be all the expenses necessary to allow the investment to be made. In the case of advertisements, the costs will be the amount invested to broadcast each one.
Therefore, to calculate ROAS you must subtract the amount obtained through the advertising campaign from the amount used for the investment. Then, this result must be divided by the same amount of costs.
It is important to know that there is no consensus on how much a successful ROAS should be measured. It will all depend on the objective and profit margin of each business.
ROI
ROI can be calculated using the following formula:
ROI = (revenue – cost/cost) x 100
The definitions of revenue and cost are the same as those mentioned above. However, unlike ROAS, which should only be used in advertising campaigns, ROI is a much more comprehensive formula. Therefore, it can be used to analyze the business as a whole or a specific project.
So, to find out, you must subtract the amount received by the analyzed project from the total amount invested in the project and then divide the result by the same amount invested. Finally, multiply the final result by 100.
As already mentioned, the difference between these two indicators is that this one encompasses more cost lines while the former is specific to advertising expenses. Thus, the latter can provide an operational view of the business and the former measures the performance of the marketing strategy .
Therefore, it is not possible to determine which of the metrics is the most important, since everything depends on the objective of each business. However, it is recommended that both are analyzed together to reach a more assertive decision.
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