ROI vs ROAS

ROI vs ROAS: Understanding the Difference Between Metrics

January 17, 2024

When analyzing your marketing and paid media budget, there are specific advertising metrics you want to keep an eye on—these will help you determine the effectiveness of your campaigns. Metrics for digital marketing like ROI vs ROAS (return on investment and return on ad spend, respectively) and other key performance indicators (KPIs) need consistent monitoring to ensure optimal outcomes. 

When planning, developing, and executing a marketing campaign, you want to be sure your ad dollars are spent wisely (we know just how costly it can get!). For your wellness brand to thrive in this competitive market, making the most of your ad campaigns is crucial. You want to maximize efficiency and efficacy while minimizing expenditures. 

Learning how to track marketing performance and the difference between ROI vs ROAS is the first step to success, especially for small to medium-sized wellness brands. With tighter budgets, these companies often have little room for error—they need to make every ad dollar count! Because data-informed and results-driven ad campaigns perform the best, it’s critical to add measuring marketing effectiveness to your overall strategy. 

We’ll go over everything you need to know—from what is a good ROAS to measuring marketing effectiveness with ROI. You’ll be an expert by the end of this or, at the very least, more confident in deciphering your advertising metrics (and if you need an extra set of helping hands, our experts at Cultivating Media are here to assist you!). 

ROI vs ROAS

Learn How to Track Marketing Performance 

Although there are many ways to analyze metrics for digital marketing, ROI and ROAS play an essential role. We’re throwing all these different acronyms at you, and you’re probably wondering what it all means! We’ll get to that in a second, and it’ll all make sense soon (we promise!). Understanding all the advertising metrics and analytics behind your marketing campaign can be overwhelming—that’s why we’re here to guide you through it. 

Now, let’s start with the basics and look at the difference between ROI vs ROAS: 

Return on Investment (ROI) 

Chances are you’ve probably heard of this term if you’re a business owner (or have ever made any investment!). Return on investment measures the performance of an investment over time. We can think about your wellness brand using ROI to determine if you’ve made good financial decisions regarding your marketing campaigns. Some examples of these investments may include marketing automation tools, digital ad spend, and website maintenance costs.   

To calculate your marketing ROI, divide your net profit by your investment cost and multiply that by 100. Since month-to-month ROI doesn’t always cover the whole picture, it’s best to calculate ROI over 12 months. This will give you a more accurate representation of measuring marketing effectiveness over the past year.  

Return on Ad Spend (ROAS) 

Next up, we have one of the metrics for digital marketing you might not be as familiar with yet! Return on ad spend focuses specifically on how effective your investments are in your paid media campaigns (such as social media, OTT, and CTV ads!). When you look at your ROAS, you can see how well specific ads perform across campaigns. This can reveal whether your spending is paying off and resulting in the desired outcome. 

To calculate ROAS, divide the amount of revenue from your ad campaign by the cost of the ad campaign. But what is a good ROAS? This would be anything over 100% or more than $1 return for each dollar you spent (though many companies aim for a higher ROAS from 200% to 400%).  

ROAS will help you compare and measure marketing effectiveness with your advertising strategy across campaigns. Combining this data with other advertising metrics, such as cost per acquisition (CPA), conversion rate, and cost per click (CPC), helps tie everything together.  

How Advertising Metrics Can Enhance Future Campaigns 

Measuring the performance of your ad campaigns will give you valuable insights into current and future campaigns. You can identify what initiatives are working and what requires any improvements. Using advertising metrics such as ROI vs ROAS will guide you in reallocating ad spend, the type of campaigns you run, and so much more! It’s imperative to remember that data-informed and results-driven campaigns are the most effective. Campaigns with little to no research will fail to perform. 

Think of ROI vs ROAS as two metrics for digital marketing that work together to help you shape your advertising strategy. Use ROI for strategic long-term planning and focus on ROAS for your ad campaign effectiveness. Both metrics are equally helpful in crafting the ultimate paid media strategy (which you will want to use as a template for future endeavors)! 

Measuring Marketing Effectiveness with Your Wellness Brand 

Keeping track of metrics for digital marketing, such as ROI vs ROAS, is essential. With these advertising metrics, you can improve your future campaigns and increase the likelihood of achieving your desired results. The goal is to ensure every dollar you invest in your advertising increases conversions. As you grow your wellness brand, having campaigns that effectively drive sales is critical for long-term success. 

If you’re confused by the different metrics for digital marketing, we understand entirely. That’s why many wellness brands have turned to us for help! Our digital marketing experts at Cultivating Media specialize in ensuring your campaigns produce measurable and desirable results. We aim to captivate, connect, and convert new audiences for your brand to help you grow.  

Visit our website to learn more about our services and the advantages of partnering with our digital media buying agency. We can’t wait to get to know your wellness brand and help you along this next phase of your journey!

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