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The Return On Advertising Spend Metric

The wealth of detailed information that Google Analytics can provide is impressive. There are hundreds of ways of charting and displaying metric data. But lets face it, website marketing strategists and/or business owners, whilst being wowed with the information need to know what to look at.

As analytics experts, we need to evaluate and understand the customers true indicators of performance and reorganize the sometimes overwhelming metric data sets into a clear format so our customers can make smart business decisions!

One of the things that I like to do to measure campaign performance is a metric called Return On Advertising Spend (ROAS).

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What is Return On Advertising Spend?

ROAS differs from Return on Investment (ROI). Return on investment measures the total margin that the total operation nets.  This includes all operation costs rather than just advertising expenditure. ROAS measures how much revenue you are making for every dollar you spend on advertising. It offers the direct result of each advertising dollar you spend and answers that all important question:

“How much is my advertising making me?”

Try answering that question with traditional print advertising!


ROAS in Action

A proper ecommerce setup using Google Analytics offers an optimal environment for measuring ROAS.  A correctly configured installation pulls actual sales data from the online receipt page into analytics. This provides huge amounts of valuable reporting. For example, linking traffic sources to revenue, a great subject for another day!

This amount of data is nothing short of confusing for a business executive and they don’t have the time to waste getting to grips with detailed information.

What we really need to do is filter this analytical data into something relevant to the decision maker  and manipulate it into more meaningful representations so that business decisions can be made.

We like to call these ‘scorecards.’

Create an ROAS Scorecard

Here is how to create a ‘scorecard’ for the ROAS metric:

  1. Open the Google Analytics Custom Reports tool, create a new report
  2. Add the ‘COST’ and ‘REVENUE’ metrics and the ‘MONTH’ dimension, title your report and create
  3. Change the dates to your required date range
  4. Export this data as a CSV file
  5. Open the CSV file, create the ROAS measurement by dividing revenue by cost and add an optional % change so see trending.
  6. Sit back and admire.

The return on advertising spend scorecard below was useful for examining the level of spend to budget for the 2009 online campaign as well as measuring fruitful sales funnel improvements made in July for this seasonal based ecommerce business.

These figures may not be completely accurate figure from a bookkeeping perspective but it provides a simple and replicable measurement that can be monitored over time. Return on advertising spend is vital when making user experience and advertising campaign changes and understanding how they affect your bottom line!

Post By Jon Dyer (18 Posts)

Jon is the VP of Operations at TechWyse and analyzes everything. This includes your analytics accounts and the difference between Coke and Pepsi. He often shares with us his advanced level knowledge of campaign analysis and Google Analytics.

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