hello@bmbmatrix.com

What is a Good ROAS on Amazon?

Amazon has more than 1.9 million sellers worldwide – and all of them are looking for customer attention. Perhaps even more important than beating the competition is the ability to get a higher ROI on your advertising investment. 

 How do you know if you are doing well? ROAS. 

Return on ad spend (ROAS) is a valuable metric for any marketer and any company. Among Amazon sellers, high ROAS is the gold standard for winning on the world’s largest platform. 

What is ROAS? 

ROAS is how much you earn on Amazon advertising for every dollar you spend. This is a useful metric for determining the success of a campaign. 

It is important to note that ROAS is different from return on investment (ROI) because it is calculated based on individual campaigns and not on the overall investment. This means that 

ROAS is a more granular metric, while ROI provides the bigger picture. ROAS is also a translation of advertising cost of sale (ACoS), which is a percentage that Amazon uses to help determine the value of advertising. 

How to Calculate Amazon’s ROAS 

You can calculate your Amazon ROAS in simple divisions. First, determine your total ad spend and total ad spend for the campaign. Note: Advertising fees may include more than your referral fee. Be sure to consider fees such as commission (for creative), vendor fees, affiliate fees, etc. 

Once you have two numbers, simply divide: 

ROAS = total ad revenue / total ad spend 

For example, if you spend $100 advertising a product and earn $400 from that campaign, your ROAS will be 4*: 

$400 ad spend / $100 ad spend = 4 

* ROAS can also be expressed as a ratio (4:1) or multiple (4x).

 The higher the ROAS number, the more profitable your ad. An ROAS of less than 1 represents an ineffective campaign that does not return the cost spent. 

You can also find your ROAS results in Seller Central by going to Ads Analytics under the Ads tab. There, you’ll find a dashboard showing your total spend, sales, ROAS, and campaign impact. 

How to find your ideal ROAS 

Regardless of your advertising goals, it’s important to strike a balance between ad spend and exposure. Calculating your minimum ROAS helps determine the best results for each product and whether the campaign is successful. 

Start by calculating your downtime before you get paid for advertising: 

Breakeven point = Selling price – (selling price + any costs) 

 Next, divide your cost of sales by the break-even to determine the minimum ROAS. The resulting numbers are what you need to achieve in ROAS to run a profitable campaign. 

Minimum ROAS = Price of sale / break-even 

 What is the best ROAS on Amazon?

As long as you remain profitable, there is no hard and fast rule to good ROAS. However, Amazon’s ROAS range is between 3 and 5. This can change depending on the profitability of your company. For example, an expensive product like consumer electronics can generate a higher ROAS than something like children’s clothing. 

 High ROAS depends on your campaign goals. You can choose to change your target ROAS based on goals ranging from brand awareness to revenue. 

How to Increase ROAS

There are several ways to improve the return on your advertising, either by reducing your costs or improving the performance of your advertising: 

What if you don’t get a high ROAS?

While higher profits are always a good thing, it’s important to measure your results in the context of your campaign goals and overall brand strategy. For example, an ad aimed at increasing brand awareness may not require a high ROAS if it means that the ad only reaches a small audience. 

 On the other hand, a lower-than-expected ROAS is not always a bad thing. Don’t forget customer lifetime value (CLV). If a customer keeps coming back to buy a product for a long time, it is worth it. 

ChannelAdvisor experts can help you improve Amazon RoAS 

We understand the challenges and moving parts that come with running an Amazon business – listings, advertising, fulfillment, customer feedback, and more. That’s why the ChannelAdvisor team has developed unique Amazon advertising expertise in our nearly 20-year relationship with the marketplace to help you achieve your best marketing results.

Leave a Reply

Your email address will not be published. Required fields are marked *