7 Key Metrics to Improve Your ROAS in 2025

The digital marketing world is spinning after the inception of AI, and 2025 is going to get even tougher. Marketers have been using it left and right for churning out content and fine-tuning their SEO, social media, and digital marketing strategies, and we cannot blame them, can we?

However, AI also has made search engines smarter. Now, Google and other search engines are devising new algorithms like the August 2024 Core Update that aims to promote high-quality content and demote low-value SEO content. 

A lot is happening in the digital marketing ecosystem, and to increase return on ad spend, professionals are using every arrow in their quiver. Today we will be talking about some of those arrows- the key metrics that can improve ROAS or (Return on Ad Spend). Intrigued about how to optimize return on ad spend in the upcoming year? Keep reading, we promise you won’t be disappointed! 

Why Should You Care About ROAS?

Starting from the basics, ROAS or Return on Ad Spend (ROAS) tells you how much revenue you are earning for every dollar you spend on ads. In fact, here’s the simple formula to calculate it:

ROAS=Revenue from Ads/Ad Spend

So, if you spend $500 on ads and generate $2,000 in revenue, your ROAS would be 4:1. In other words, for every dollar you spend on ads, you make four dollars in return. Pretty sweet, right?

If you have taken the stubborn route, and are thinking, “Why is this ROAS so important,” we have some information for you. 

Suppose, you have just launched a new ad campaign, and after a few days of running it, you check your numbers. Yes, your ad spend is climbing, but your return? Not quite where you would like it to be. Quite frustrating right? We have all been there, but if you had followed the right ROAS optimization tips and cared about your ROAS, you wouldn’t be here. 

Your ROAS or return on ad spend showcases how effectively your ads are driving revenue in different audience segments. A rock-solid ROAS invariably and implicitly means you are getting more bang for your buck, which means your marketing is working. However, if it’s low, this can be a potential sign that your strategy needs tweaking, and you need to work on different metrics to optimize ad spend. 

The ROAS of your advertising campaign helps you figure out what’s working and where to double down, so you can ensure every dollar spent on advertising counts. But how do you do it? How can you make that 4:1 ratio even better and improve ROAS? Fret not, here are 7 metrics that can make your ROAS boat afloat on turbulent digital waters. 

#1 Conversion Rates

When we are talking about key metrics for ROAS, there’s no way we can miss conversion rates. 

Conversion rate denotes the percentage of people who take the action you want them to take after clicking on your ad. Whether it’s about making a purchase, signing up for an email list, or downloading an app, if your conversion rate is high, this means your ad is bringing in the right people, and your landing pages are converting them. 

However, if your conversion rate is low, something’s not clicking in your advertising efforts, and it’s time to dig deeper and figure out why. 

How to Improvise Your Conversion Rates?

There are several ways to hike your conversion rates and create an ad that resonates best with your audience. Some of these ways include-

• Optimizing Your Landing Pages: Your ad promises something, and you need to ensure your landing page delivers on that promise. When your customers open your site they expect a seamless experience from click to purchase, and you need to give them that effortless user experience, if you want your conversion rates to break through the roof. 
• A/B Testing: Don’t know what’s working and what’s not in your Google ads campaign? No worries! You can try different headlines, images, and calls-to-action (CTAs) to unearth the aspects that get the best response for specific ad campaigns. 
• Minimize Friction: We live in an era where customers have the attention span of a goldfish. In fact, the average human attention span is a mere 8.25 seconds!! (Source) So, if you want your customers to make a purchase within their limited (and rapidly fleeting) attention span, simplify your UX. Don’t make your target audiences jump through hoops because the fewer steps a customer has to take to convert, the better. 

When you work on your conversion rate, you have the window of opportunity to make sure your ad spend is working for you, so you can hike the amount of revenue generated and improve your ROAS. 

#2 Customer Lifetime Value (CLV)

This one is also called the long-term picture of the ROAS performance metrics.

Customer Lifetime Value or CLV isn’t just about one-time sales; instead, it’s about how much a customer will spend with your business in the long haul. 

When you can increase the lifetime value of your customers, you can afford to spend a bit more to acquire them through ads, hence you know you will make that money back, and then some. This is why CLV is crucial. 

Think about it this way: if a customer buys from you once, that sale covers the cost of your ad spend. But, if that customer comes back, buys again, or even refers to other customers, aren’t you now looking at a real profit? Yes, you are!

How to Improve CLV?

• Personalize Your Marketing Strategy: For one, you need to send bespoke product recommendations, exclusive offers, and personalized emails by studying user behavior and analyzing ROAS data, so that your customers keep coming back. 
• Loyalty Programs: Secondly, you can also offer rewards for repeat purchases. Customers love feeling appreciated, and a loyalty program is an excellent way to build long-term relationships in the industry. 
• Upsell and Cross-sell: When someone buys something from your brand, you can suggest related products or premium versions of what they are already purchasing. 

With a higher CLV, you will have more room to spend on ads without worrying too much about the immediate returns, so your ROAS soars higher. 

#3 Cost Per Acquisition (CPA)

When you are creating your bidding strategies or running an ad, do you ever feel that you are paying too much?

If it seems that your ad costs are spiking beyond your comprehension, your CPA is struggling. Cost Per Acquisition tells you how much it costs to acquire a new customer. So, if your CPA is too high, there are chances that it could be eating into your profits and hurting your ROAS. So, even if you are spending $100 to acquire a customer, you will end up making only $50 in return. Now, that’s a problem, isn’t it?

How to Improve CPA?

If your ROAS improvement strategies also involve working on CPA, here’s what you can do:

• Target the Right Audience: Get very specific with your targeting in real-time. The more precise you are, the less you will waste on people who aren’t likely to convert. 
• Refine Your Ad Creatives: Create your ads to be more compelling and relative, and we bet they will perform better and reduce your CPA by leaps and bounds. 
• Remarketing: If someone visited your site, but didn’t convert, remarketing ads can do wonders and bring them back, which can also improve your CPA. 

When you lower your CPA, this means you will be getting more for your ad spend, which directly impacts your ROAS. 

#4 Click-Through Rate (CTR)

If your digital advertising metrics aren’t reaping the results as they should, you need to start thinking about how engaged your audience is. This is where CTR comes into the big picture. 

The click-through rates show you how many people clicked on your ad compared to how many saw it. A high CTR means your ads are grabbing attention, and that’s a good thing. The more clicks you get, the more visitors you’re bringing to your site, and the more chances you have to convert them.

If your CTR is low, it could be a sign that your ad isn’t resonating with your audience.

How to Improve CTR:

• Refine Your Targeting: Make sure your ads are reaching the right people. If you are targeting the wrong audience, your CTR will drop.
• Make Your Ads Stand Out: Use compelling visuals and strong headlines that catch attention and make people want to click.
• Strong CTAs: Your call-to-action should be clear and encourage users to take the next step.

A higher CTR can lead to better-quality scores on platforms like Google Ads, which in turn can lower your cost per click (CPC) and improve your ROAS.

#5 Average Order Value (AOV) 

What if you could get your customers to spend more every time they make a purchase? That’s where Average Order Value (AOV) comes into play. A higher AOV means more revenue per sale, and that directly impacts your ROAS.

By focusing on boosting your AOV, you can improve your revenue without having to increase your advertising spend.

How to Improve AOV:

• Bundle Products: Offer discounts when customers buy multiple products together.
• Cross-Sell and Upsell: Just like you did to improve your CLV, show customers related products or premium versions of what they’re buying.
• Volume Discounts: Encourage bigger purchases with “Buy 1, get 1 50% off” deals or similar promotions.

A higher AOV means you are maximizing each sale, which helps you cover your ad spend more quickly and spikes your ROAS.

#6 Ad Frequency: Don’t Overwhelm Your Audience

In the terminology of digital marketing metrics, ad frequency refers to how many times your target audience sees your ad. Too much exposure can lead to ad fatigue, where people start ignoring your ads or getting annoyed by them. But not enough exposure and people may forget about you, so you need to find just the perfect balance.

How to Manage Ad Frequency:

• Use Frequency Caps: Limit how often your ads are shown to the same person to avoid overexposure.
• Rotate Creatives: Keep things fresh by changing up your ad creatives regularly to avoid monotony.
• Segment Audiences: Instead of showing the same ad to everyone, create different ads for different segments of your audience to keep it relevant.

When you manage your ad frequency properly, you will keep your audience engaged without overloading them, hence improving your ROAS.

#7 Return on Investment (ROI)- The Big Picture

Most people get lost in the ROAS vs ROI debate, but the truth is you need to improve your ROI, if you want more ROAS. 

While ROAS measures revenue from ads, ROI takes a broader view, accounting for the total profit from your business activities. A positive ROI indicates that your overall business operations are profitable, and a higher ROI typically means your ROAS is also improving.

How to Improve ROI:

• Track All Expenses: Keep an eye on not just ad spend, but all costs involved in running your business, from production to overhead.
• Increase Efficiency: Look for ways to streamline your operations and cut unnecessary costs.
• Focus on High-Margin Products: Prioritize selling products with higher margins to improve profitability.

Improving your ROI means you are running a more profitable business, and that translates to a better ROAS.

Wrapping Up

There you have it- 7 solid PPC campaign performance metrics that can help you improve your ROAS, so your ad budget works harder for you. Yes, these metrics can work their magic, but if you really want to ace that ad game, always remember- IT’S ALWAYS ABOUT MAKING SMART, DATA-DRIVEN DECISIONS with the right ROAS tracking tools. 

Still thinking about how to improve ROAS or need more advertising performance metrics to get better returns? Stay tuned for our next update, or reach out to our team directly to optimize your advertising efforts and see better results! 

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