How to increase ROAS with personalized marketing

Return on ad spend (ROAS) is a crucial metric for marketers: It shows you how much you earn from running a specific ad or campaign. Marketing is an investment, and ROAS helps you determine which ads will pay the most dividends.

How does ROAS work?

ROAS measures how much revenue you generate compared to what you spend on advertising. It’s similar to return on investment (ROI), but there is one key difference: ROI typically measures your overall marketing strategy, while ROAS is a more specific measurement that looks at individual ads or campaigns.

Why is tracking your ROAS so important? It’s an efficient way to evaluate whether or not a campaign is worth the resources you’re putting into it. ROAS also lets you track the targeting changes you make to your ads and determine if they’re working as expected.

Calculating ROAS

The ROAS calculation formula is much simpler than many other marketing metrics. There are two different methods you can use to calculate your ROAS:

1. Revenue / cost

The first way to calculate ROAS is to divide your revenue from an ad campaign by the amount you spend on it. This ROAS calculation is the more basic of the two, but it has one significant limitation: The formula doesn’t show you the actual cash flow that comes in from your ad campaigns since it doesn’t take into account fulfillment costs.

2. (Revenue – cost) / cost

In this ROAS calculation, you subtract the amount you paid to run your campaign from the revenue it generated and divide that number by your ad spend. The advantage of using this formula is that the result shows your actual returns from the marketing campaign.

While you can use either ROAS calculation method, it’s important to understand what the result from each one means. Let’s look at an easy example:

You spent $1,000 on an ad campaign and made $2,000 in revenue. Using the first formula, you calculate that you’re making $2 for every $1 you spend, but that’s not giving you a lot of insight into how profitable your ad campaign is. Using the second formula, your ROAS would be 1x—you’re making $1 for every $1 spent. This calculation is more ROI-based, while the first one only looks at ROAS, but it gives you more insight into your ad campaign’s performance.

Improving your ROAS with personalized marketing

The best way to increase your ROAS is by running the right ads—personalized ones. Brands that lack personalization in their marketing efforts stand to lose 38% of customers, but when they provide a more personalized experience, 80% of consumers are more likely to engage with the business and make a purchase.

ROAS marketing is all about getting the most out of your ad campaigns, and here’s how personalized marketing can make that happen:

Go beyond segmenting your audience

Segmentation used to be enough to give your customers the personalized experience they wanted, but static segmentation is too general—today’s consumers expect more. Targeting a segment of customers with the same ads because they have similar interests (known as audience targeting) is basically seen as spam these days. Customers want you to treat them like an individual, and they expect you to know their specific needs. With a customer data platform, you can use real-time data to segment your audiences dynamically, not statically.

Lean into omnichannel personalization

Omnichannel personalization lets you increase your ROAS by creating and maintaining a consistent relationship with your customers each time they interact with your brand. The biggest challenge for this is collecting, analyzing, and reacting to customer data in real time across the various touchpoints they have with your brand. Utilizing a customer data platform is a great way to achieve omnichannel personalization to deliver a consistent, personalized experience to your customers across email, mobile, web ads, and more.

Remember that relevance is everything

Your customers want you to communicate with them personally—they don’t want to be thrown in a segment just because their purchase history is similar to someone else’s. For example, when customers receive emails from Amazon, they get recommendations that are uniquely relevant to them based on their browsing and purchase history. Amazon doesn’t know what to recommend to each person because they segment their audience better; they use behavioral data to discover what, when, and why customers visit the pages that they do.

Increase your ROAS with Lytics

Gathering customer data is the first step, but what you do with it is even more important. You need to leverage that data to deliver personalized experiences that increase your ROAS. With Lytics, you can:

• Gain insights to create intelligent customer profiles and identify predictive behaviors
• Segment your audiences dynamically based on data science and behavioral cues in real time
• Deliver a consistent personal experience across all of your marketing channels
• Use the power of AI and machine learning to suggest and deliver relevant, personalized content

Get started with Lytics today to increase your ROAS by giving your customers a truly personalized experience.