{"id":112758,"date":"2022-10-27T22:05:59","date_gmt":"2022-10-27T22:05:59","guid":{"rendered":"https:\/\/www-dev.channeladvisor.com\/blog\/uncategorized-au-2\/what-is-a-good-roas-on-amazon\/"},"modified":"2023-11-29T10:46:09","modified_gmt":"2023-11-29T10:46:09","slug":"what-is-a-good-roas-on-amazon","status":"publish","type":"post","link":"https:\/\/old.rithum.com\/au\/blog\/what-is-a-good-roas-on-amazon\/","title":{"rendered":"What is a Good ROAS on Amazon?"},"content":{"rendered":"

Amazon has more than <\/span>1.9 million sellers<\/span><\/a> around the world \u2014 and they\u2019re all vying for customer attention. But perhaps even more important than beating out competitors is the ability to elicit a high return on your advertising investment.\u00a0<\/span><\/p>\n

How can you know if you\u2019re succeeding? ROAS.\u00a0<\/span><\/p>\n

Return on advertising spend (ROAS) is a valuable metric for any marketer in any industry. Among Amazon sellers, a high ROAS is the gold standard for winning on the world\u2019s largest platform.\u00a0<\/span><\/p>\n

What Is ROAS?<\/b><\/h2>\n

ROAS is the amount of money you make on an <\/span>Amazon Advertising<\/span><\/a> campaign for every dollar you spend. It\u2019s a metric that\u2019s useful for determining a campaign\u2019s success.\u00a0<\/span><\/p>\n

It\u2019s important to note that ROAS differs from return on investment (ROI) because it\u2019s calculated based on an individual campaign, not overall investment. This means ROAS is a more granular metric, whereas ROI provides the bigger picture.\u00a0<\/span><\/p>\n

ROAS is also the inverse of advertising cost of sales (ACoS), which is a percentage <\/span>Amazon uses<\/span><\/a> to help determine ad cost efficiency.\u00a0<\/span><\/p>\n

How to Calculate Amazon ROAS<\/b><\/h2>\n

You can calculate your Amazon ROAS with some simple division. First, identify your <\/span>total ad sales<\/b> and <\/span>total ad spend<\/b> for a campaign. Remember: Ad costs may include more than just your bid amount. Be sure to account for costs like labor (for creative assets), vendor fees, affiliate commissions, etc.\u00a0<\/span><\/p>\n

Once you have both figures, simply divide:<\/span><\/p>\n

ROAS = Total ad sales \/ total ad spend\u00a0<\/b><\/p>\n

For example, if you spent $100 to advertise a product, and you made $400 on that campaign, your ROAS would be 4*:<\/span><\/p>\n

$400 ad sales \/ $100 ad spend = 4<\/span><\/p>\n

*ROAS can also be expressed as a ratio (4:1) or multiple (4x).\u00a0<\/span><\/p>\n

The higher the ROAS number, the more profitable your campaign is. ROAS below 1 represents an unprofitable campaign that did not recover the cost spent.\u00a0<\/span><\/p>\n

You can also find your ROAS results in <\/span>Seller Central<\/span><\/a> by navigating to Campaign Manager under the Advertising tab. There, you\u2019ll see a dashboard featuring total spend, sales, ROAS and impressions for your campaigns.\u00a0<\/span><\/p>\n

How to Determine Your Ideal ROAS<\/b><\/h2>\n

No matter your advertising goals, it\u2019s important to find a balance between ad spend and exposure. Calculating your minimum ROAS helps determine your ideal outcome for each product and whether its campaigns are successful.\u00a0<\/span><\/p>\n

Start by calculating your break-even point before factoring in advertising costs:<\/span><\/p>\n

Break-even point = Sale price – (cost of goods sold + any fees)<\/b><\/p>\n

Then, divide your sale price by the break-even point to determine minimum ROAS. The resulting number is what you must achieve in ROAS to run a profitable campaign.\u00a0<\/span><\/p>\n

Minimum ROAS = Sale price \/ break-even point<\/b><\/p>\n

What Is a Good ROAS on Amazon?<\/b><\/h2>\n

As long as you remain profitable, there\u2019s no hard and fast rule on the ideal ROAS. However, typical Amazon ROAS is somewhere between 3 and 5. This may change depending on your industry\u2019s average profit margin. For instance, higher-dollar goods like consumer electronics may reap a much higher ROAS than items like kids apparel.\u00a0<\/span><\/p>\n

A strong ROAS is also dependent on your campaign goals. You may choose to fluctuate your target ROAS depending on objectives ranging from brand awareness to revenue generation.<\/span><\/p>\n

How to Increase ROAS<\/b><\/h2>\n

There are multiple ways to improve your return on ads, whether in lowering your costs or improving ad performance:<\/span><\/b><\/p>\n