How to Increase ROAS by 20% – Facebook Ads

Piyush Gupta | Manager, Product Growth
Reading Time: 4 minutes

Introduction

Digital marketing, particularly on social media platforms, has become an area of intense competition among digital marketers who strive to get even a few seconds of users’ attention. The stronger your digital marketing game is, the less is your customer acquisition cost and more is your profitability.

All are aware of the vast presence of Facebook. It is the biggest social media platform, making it one of the best advertising platforms. Most companies are already investing in Facebook ads, which will give them returns sooner or later. However, the actual task is to get maximum returns with minimum investment from every ad campaign. For this, the companies need to optimise their ad spend, measured by Return on Ad Spend (ROAS).

Facebook’s ROAS is simply the revenue your ad campaigns generate for you. It can be measured using the formula: ROAS = Ad revenue/ Ad spend

Here is a list of digital marketers can use for Facebook Ads performance improvement.

Audience Budget Distribution

While marketing any product, a business needs to target both new and existing customers. The ratio of budget distribution between each category of customers should be consistent. If you focus on targeting only new customers while ignoring the existing ones, you might lose on potential users who were already convinced about the quality of your product. On the other hand, focusing more on the existing customers will erode your bottom of the funnel audiences. Hence, both situations will result in low ROAS.

Audience overlapping

This is a major challenge while advertising on Facebook. Audience overlapping means marketing to the same audience with different ad sets. The larger the overlap, the worse the outcomes of your ad campaigns since you will be wasting time and money on multiple ad sets fighting for the same audience’s attention. When your ad sets start competing against each other, the ad frequency reduces, and the cost to reach the user increases. To overcome this problem, Facebook has launched a tool in the Ads Manager to compare targets and discover overlap. To get the best possible result from your ad campaign, you need to tackle audience overlapping. You can check if two audiences you’re using are overlapping with the audience overlapping tool:

  • Go to Audiences
  • Choose the audiences you want to compare (up to 5)
  • Click three dots action button (…) > Show Audience Overlap

Ad fatigue

Ad fatigue is an issue faced by ad campaigns when the frequency of the campaign reaches an unacceptably high level. As a result of seeing the same advertisement repeatedly, your target viewers will grow less responsive or completely ignore the ads. It reduces relevance scores and cost per result, thus reducing the overall ROAS.

To tackle ad fatigue, you need to identify it first. For this, consider four metrics: cost, relevance, frequency, and CPM for each ad. This will help you to determine which ads are not performing well.

Audience saturation

Each ad set has a limited life span, and its performance tends to decrease with time. Even if you implement all creative enhancement activities, it will not improve beyond a certain time. This is because a majority already sees the ad of your target audience, and very few people are left who will see it for the first time. This is known as audience saturation. A low First-time impression ratio and high Audience reach ratio indicate that your ad has reached the maximum audience. This suggests that the ad has yielded the maximum benefit possible, and it’s no use now to keep investing in it.

Use Facebook Pixels

Facebook Pixel is commonly considered as a targeting and tracking tool provided by Facebook, but it can do much more than that. It measures the effectiveness of your Facebook ads by observing the actions of users. It can offer several benefits to digital marketers. It can track cross-device conversions and create custom audiences from website visitors. It also reports these visitors’ interactions, which informs you when a customer sees your ad. Most importantly, it ensures that your ads are seen by people who are most likely to be interested in your brand and make a purchase. Thus, your ads are shown to the right people leading to a better ROAS.

No doubt, in this digital era, Facebook ads can act as a catalyst for your profitability and business growth. But to get the most out of it, you have to start optimising your ad performance. By working on the above factors, you can gauge the performance of your ad campaigns and significantly increase your ROAS. However, while focusing on increasing your ROAS, keep in mind that the ultimate goal is to deliver a fantastic experience to your customers. Retaining existing customers is equally important, if not more, as acquiring new ones. 

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