Return on advertising expenditure（RoAS）It is an indicator used by brands to measure the effectiveness of advertising activities.Amazon RoASHelps businesses determine exactly how much revenue they generate, or whether they derive fromAmazon AdvertisingThe investment generates income.
according toFeedvisor reports that althoughAmazonCost of using advertising sales（ACoS）As a key indicator of its PPC activity platform, rather than RoAS (Return on advertising spend), brands should calculate RoAS from different perspectives to measure their success.
IHow to calculate RoAS
1. RoAS=advertising expenditure income/advertising expenditure cost
As shown above, brands can divide the revenue of advertising expenditure by the cost of advertising expenditure to calculateRoAS。Blue Ocean Yiguan has learned that,This figure will reveal whether a brand's advertising is profitable.
For example, if the Amazon seller spent $2000 on advertising, but generated $8000 in revenue that month, then the RoAS is four times. Four times the number (i.e. 4 dollars or 400%) represents a 4:1 ratio, which means that a brand is allocated toFor every $1, there will be a gain of $4。
RoAS and ACoS are indicators used to help brands measure their advertising campaign returns.
2. ACoS=advertising expenditure/advertising revenue x 100
RoAS and ACoS formulas are inverted, because each measurement is calculated based on brand priority. RoAS shows how much revenue a brand gets from advertising spending, while ACoS shows the percentage of advertising spending in total revenue.
An advertising campaign that costs $2000 generates $8000 in revenue, which is four times that of RoAS ($4 or 400%). Substitute these figures into the ACoS formula ($2000/$8000 × 100), the result is 25%. Finally, 4 times RoAS is 25% ACoS.
IIWhat is a good RoAS?
A good RoAS will vary according to enterprise goals and industries. According to the data of Feedvisor:
For example,Toys and gamesThe RoAS of class is 4.5 times, whileConsumer ElectronicsRoAS is 9 times. Brands using Amazon advertising can refer to the product category benchmark to download the report for more in-depth understanding.
As mentioned earlier, good RoAS is different for each brand, depending on the enterprise goals and the level of competition in the industry.
1. Small and medium-sized enterprises that want to improve brand and product exposure usually have low RoAS goals, because they need to invest a lot of money in advertising to obtain more users.
2. The target RoAS of brands with fierce competition in the industry, such as online groceries, is also low.
Brand RoAS is also affected by different factors, such as profit margin, operating expenses and overall corporate health.
Enterprises with high profit margins can survive in low RoAS, and low profit margins will encourage brands to reduce advertising investment. Smaller enterprises can achieve brand growth with lower RoAS by improving their popularity, but they cannot maintain the same low growth rate for a long time.
3、 How to calculate product profit margin and break even RoAS
1. Product profit margin=((sales value - cost involved)/sales value) × one hundred
Product profit margin refers to the percentage of profit obtained from selling products.
For example, if an Amazon seller sells a product for $100, and the cost of producing a product is $40, the profit margin is 60%. The profit margin of 60% is very high. Although the ideal profit margin varies from industry to industry, the standard benchmark for a good profit margin is 20%.
Break Even RoAS refers to a brand that has no profit or loss in advertising expenditure. Referring to the above example, 60% profit margin means 166% breakevenRoAS。According to Blue Ocean Yiguan,In this case, the brand must generate more than 166% RoAS to be profitable.
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