Running a business in any industry takes time and money. Advertising is (one of) the single most important aspects of every business model. However, many companies, especially start-ups, spend their ad budgets in the wrong places.
The Difference Between Return On Ad Spend and Cost Per Sales
Yes, businesses should emphasize both the ROAS and Cost Per Sales aspects of their marketing plans. Scaling on the end of ROAS makes it possible for more money to roll in, in the long run.
ROAS: Return On Ad Spend measures what a business earns for every dollar spent on advertising and marketing campaigns.
Cost Per Sales: Cost Per Sales, quite basically, is the amount made on every sale. Businesses typically calculate Cost Per Sales by subtracting year-end inventory from beginning inventory, along with purchases and other costs.
While it seems like it makes more sense to concentrate on the profits made from each sale, this is not always the case.
Focusing on Long-Term ROAS
Focusing on long-term ROAS will prove to be nothing but beneficial. A majority of the business focusing on conversions specializes in e-commerce. Whether the focus is on services or goods, there often isn’t much measurable consistency across the rate of conversion.
This inconsistency makes the use of ROAS valuable.
When it comes to selling online, not all customers are created equal. Businesses must target their marketing budgets toward quality over quantity. Backing ROAS means that the customer pool may shrink a bit, but result in quality consumers willing to spend, as well as repeat business.
ROAS and Cost Per Sale are not the ends all be all of advertising and client contact and retention, but it’s where the campaign should begin. Businesses want to appeal to customers that remain loyal to their brand. Understanding and focusing on ROAS is a great place to start.