What you need to know. Navigating performance metrics is difficult which is why first you need to identify what type of ad campaign is right for your business. Marketers utilize all different types of positioning and tools to improve ad performance based on a campaign's objective. Whether it's brand awareness or promotional campaigns, there's a lot to know when it comes to the Return on Advertising Spend (ROAS).
Conversions refer to actions taken on your website. This could mean different things to different businesses. In general, it refers to the desired action you want to take place. For example, it could refer to adding a product to a cart, checking out or entering an email address.
What is ROAS?
Return On Advertising Spend, (ROAS), is a marketing metric that measures the efficacy of a digital advertising campaign. Its is simply dividing your revenue by your ad spend. Companies use ROAS to make informed decisions on where to invest their ad dollars with the goal of maximizing effciency.
Facebook's Campaign Budget Optimization
If you use Facebook for your digital marketing and advertising, you know that campaign budget optimization isn’t easy. Facebook recognized this difficulty and launched their Campaign Budget Optimization(CBO) in 2019. It's a feature that helps you automatically redistribute your budget to the best performing audience. CBO uses your campaign budget and your bid strategy - which might be, for example, lowest cost per action (CPA) or highest return on ad spend (ROAS) - to automatically and continuously find the best active opportunities for results across your ad sets. Then Facebook distributes your campaign budget in real time to get those results. Facebook does not allow CBO from brand awareness campaigns.The image below provides a visual example of how CBO works.
ROAS is a great metric and highly used by advertising agencies. What ROAS does not illustrate is potential. Let’s say your spend $2,000 on advertising and got $10,000 in revenue. You have a $5 ROAS. For every $1 you spend on advertising you expect $5 in revenue, but what if your revenue potential is higher that $10,000? There is not a metric to show lost potential. We created LIFT potential to bridge this gap and provide a universal metric for advertisers to use in both conversion and brand building campaigns. Showing you which ads deserve more of your budget.
You shouldn't have to track different metric for different campaigns. If you look across any of your Facebook campaigns your ads with have a percentage of spend, percentage of impressions, and a percentage of whatever action you are optimizing for. While these metrics are highly correlated, they still have a non-linear relationship. A nonlinear relationship is a type of relationship between two entities in which change in one entity does not correspond with constant change in the other entity.
The difficulty in determining this number arises because the percentage of your spend, the percentage of your actions, and the percentage of your impressions will not add up to 100%. We smooth out the percentages and adjust for differences in spend so that LIFT Potential is a statistically significant reflection of the performance of each ad.
Schedule a demo today to how LIFT Potential can improve your Facebook Advertising.