How to increase ROAS: 4 ways to optimize your ad spend today

With competition in performance marketing hotter than it’s ever been, every dollar counts for modern marketers.

Businesses today want more than just clicks—they need tangible returns from their ad spend. For this reason, ROAS, or Return on Ad Spend, has quickly become a north star metric for many advertisers.

But how do you increase ROAS without burning through your budget? It’s easy—if you have the right know-how.

Whether you’re refining your strategy or starting from scratch, we’ve compiled 4 actionable tips to boost your ROAS and get more out of every dollar.

Definition: What is ROAS in digital marketing?

ROAS, or Return on Ad Spend, is a simple (yet powerful) metric which indicates how well your digital ads are working.

In plain terms, it measures how much revenue you’re pulling in for every dollar you spend on advertising. It’s a handy way to figure out if your ad dollars are really paying off or just getting lost in the noise.

Here’s the basic formula:

ROAS = Revenue generated from ads / Cost of the ads

So, if you spend $1,000 on a campaign and make $5,000 in sales, your ROAS is 5:1. That means for every dollar you invest, you’re getting five dollars back. You may have also seen ROAS expressed as a percentage, so we’ll share an example of that shortly.

But why does this calculation matter at all?

Unlike clicks or impressions, which show how many people saw your ad, ROAS gets straight to the point. It focuses directly on revenue. It’s a very direct method to see if your ads are actually moving the needle for your business.

But what is a “good” ROAS? That varies depending on your industry and business goals, but in general? The higher, the better.

Just keep in mind that the “right” ROAS will look different depending on your objectives and the ad platforms you’re using.

What is “breakeven” ROAS?

You might have heard the term “breakeven” ROAS before, so let’s break it down.

Essentially, breakeven ROAS refers to the point where the revenue generated from your ad campaign equals the cost of running the ads. In other words, it’s the ROAS you need to achieve to avoid losing money.

You can calculate breakeven ROAS using this formula:

Breakeven ROAS = 1 / Profit Margin

For example, if your profit margin is 25%, your breakeven ROAS would be 4:1, meaning you need to make $4 in revenue for every $1 spent just to cover your costs.

How to calculate ROAS as a percentage

One of the easiest to understand formats for interpreting ROAS is as a percentage, and calculating it is equally straightforward.

Return on ad spend formula:

ROAS % = (Revenue from Ads / Cost of Ads) x 100

This will give you a percentage that shows how much return you’re getting for every dollar spent. A higher ROAS means your ads are paying off well, while a lower ROAS suggests there might be room for improvement.

At this point, you might be wondering, just what is a good ROAS percentage? Let’s look at a couple of examples to see how it works:

So, what do different ROAS values really mean for your business?

As with all things in advertising, it depends. In eCommerce, a ROAS of 400%-500% might be ideal due to tighter margins. But if you’re in a service-based industry with high lifetime customer value, a lower ROAS might still be acceptable.

The key is to look beyond the numbers and understand what works for your specific business model and goals.

How to increase ROAS in your ad campaigns

Now that you’re familiar with the basics of ROAS, let’s get to the good stuff: how do you optimize the ROAS you’re achieving with your campaigns?

Here are 4 simple strategies you can deploy today to start increasing your ROAS right away.

1. Fine-tune your audience targeting

Different customers respond to different messages.

Segmenting your audience by purchase history, demographics, or interests helps you show them more relevant ads. This increases the chances of conversion and puts your ROAS on an upward trajectory.

For example, you might want to show loyalty rewards or exclusive deals to repeat customers while presenting first-time visitors with introductory offers.

There’s a lot to learn when it comes to audience targeting, but here are some starting points to help you target more effectively:

• Lookalike audiences: Use data from your existing customers to find people with similar behaviors and preferences.
• Retargeting: Show ads to users who have already interacted with your brand, like those who visited your site or abandoned their shopping cart.
• Interest-based targeting: Deliver ads to users who have shown interest in products or categories that align with your offerings.

2. Ad spend optimization (without compromising performance)

Sometimes, you can make meaningful improvements to your ROAS by spending smarter, rather than simply increasing budget.

Here’s how:

• Pause underperforming ads. Regularly review your campaigns and pause any ads that aren’t delivering strong results, so you can allocate more budget to your top performers.
• Use smart bidding strategies. Automated bidding tools in platforms like Commerce Growth leverage commerce AI to adjust your bids in real-time based on user behavior, ensuring you’re maximizing returns on the best opportunities.
• Make use of ad scheduling. Focus your spend during peak times when your audience is most active. Running ads only during high-engagement periods can lead to better results without increasing costs.
• Test and rotate ad creatives. Constantly test different ad formats, messaging, and visuals to find what resonates best with your audience. Small tweaks can lead to higher engagement and better conversion rates.

3. Take another look at your landing pages

If you think about it, your landing pages do a lot of the heavy lifting when it comes to generating ROAS.

In fact, we’d go so far as to say a high-performing landing page can make or break your ROAS. The answer? Optimize your landing pages to really drive conversions.

Here’s how to do it:

• Focus on key elements of a high-converting landing page. Keep your messaging clear and concise, include a strong call to action, and ensure that your design is visually appealing yet simple. Pages with fast load times and mobile responsiveness are essential.
• Optimize your content. Relevant and engaging content is essential. Make sure your landing page speaks directly to the audience you’re targeting and matches the messaging in your ads. Include testimonials or trust signals to build credibility.
• Run A/B tests. Simple tweaks, like testing different headlines or calls to action, can have a significant impact on conversion rates. Tools like heatmaps can help you see how users are interacting with your page and guide improvements.
• Use persuasive design elements. Incorporate design features like directional cues (arrows, lines) that guide the user’s eye to your CTA, or use contrasting colors to make important elements pop.

By following these best practices and continually testing and refining, you’ll enhance your landing page performance and see a significant lift in ROAS.

4. Don’t ignore Customer Lifetime Value (CLV)

When considering ROAS, many businesses focus solely on immediate returns from ad spend. But factoring in customer lifetime value (CLV) can give you a more complete picture of long-term profitability.

Here’s why:

• Understand customer value over the long term. CLV measures the total revenue a customer is expected to generate over their relationship with your brand. If your customers tend to make repeat purchases or subscribe to long-term services, your ads could be more valuable than their short-term ROAS suggests.
• Adjust your acquisition spend. A higher CLV means you can afford to spend more upfront to acquire a customer, even if it results in a lower initial ROAS. This is particularly useful for subscription businesses or companies with strong retention strategies.
• Prioritize high-CLV customers. Use your data to identify segments of customers with the highest lifetime value and target your ads to attract more of them. This approach improves both your short-term ROAS and long-term profitability.
• Invest in retention campaigns. Once you’ve acquired a customer, focus on keeping them engaged. Retargeting ads, loyalty programs, and personalized offers can boost CLV and make your ROAS more effective over time.

Ready to see your ROAS soar?

Enhancing your advertising spend return doesn’t need to be complicated.

With the right strategies, you can make every dollar spent on advertising, work harder. From setting clear goals to optimizing landing pages, targeting high-CLV customers, and using AI to refine your campaigns, it’s all about working smarter, not harder.

These tactics are practical, proven methods that can help you get more value out of your ad spend. When you focus on efficiency and precision, you’ll see your ROAS improve quickly.

Ready to take action? Start implementing these strategies today and let Criteo Commerce Growth supercharge your targeting and campaign optimization.