Return on Ad Spend (ROAS) is one of the most critical metrics for assessing the effectiveness of your marketing campaigns. It tells you how much revenue you earn for each dollar spent on advertising. However, measuring ROAS accurately can be tricky, especially when it varies significantly across industries. Let’s dive into why ROAS is difficult to measure and explore some industry benchmarks.
What is ROAS?
ROAS is calculated by dividing your total revenue generated from ads by the cost of those ads. For example, if you spend $100 on advertising and generate $500 in sales, your ROAS would be 5:1.
While the formula is simple, many factors—such as customer lifetime value, seasonal variations, and attribution models—can complicate the measurement of ROAS across different industries.
Industry Benchmarks for ROAS
Here’s a quick look at average ROAS across key industries:
- E-commerce: ROAS typically ranges from 4:1 to 10:1, depending on the product and competition.
- Retail: Retailers generally see a ROAS of 4:1 to 8:1, with physical stores often seeing lower returns compared to online-only shops.
- Healthcare: ROAS in healthcare can be as low as 2:1, due to the high cost of acquiring new patients.
- Travel: Travel companies often experience lower ROAS (3:1 to 5:1) due to heavy competition and fluctuating demand.
- Real Estate: ROAS can be as high as 10:1 in luxury real estate, but much lower in local markets.
Why ROAS is Hard to Measure
- Attribution Issues: It’s challenging to pinpoint which ad or channel directly led to a sale, especially with multi-touchpoints across customer journeys.
- Customer Lifetime Value (CLV): Some industries, like subscription-based services, have to account for long-term customer value, which complicates short-term ROAS calculations.
- Seasonality: Industries like retail and travel experience huge seasonal shifts in demand, making it difficult to maintain consistent ROAS year-round.
Improving ROAS Tracking
To get a clearer picture of your ROAS, use advanced attribution models that track customer interactions across multiple touchpoints. Pair this with a deep understanding of your industry’s seasonal trends and customer lifetime value to make more informed decisions.
Final Thoughts:
Measuring ROAS is challenging, especially with varying benchmarks across industries. To truly gauge performance, you’ll need to account for factors like customer behavior, market conditions, and industry standards.
Want to optimize your ad spend and boost ROAS? Contact us for a customized strategy that aligns with your industry’s benchmarks.
