If you're a marketer in the world of digital advertising, you've likely heard of target ROAS (tROAS). This powerful PPC bidding strategy allows businesses to set a specific goal for their Google campaigns, ensuring they generate the desired revenue for their investment.
This guide will cover everything you need to know about target ROAS advertising, including how to calculate it, how to set up a target ROAS campaign, and how to measure your results and scale with data.
Target ROAS, or target return on ad spend, is an Automated Smart Bidding strategy that allows you to set a specific goal for the return you want to generate from your ad spend. When running with Smart Bid Strategies, Google will "optimize for conversions or conversion value in every auction." This means that Google will try to get as many conversions as possible, helping you be profitable towards your goals.
With Target ROAS, if you set your goal of 500%, then you're telling Google Ads that for every $1 you spend on advertising, you want to generate at least $5 in revenue. Google does this by tactically adjusting CPC bids to bring you your desired return.
Accurate revenue tracking is essential for the success of a target ROAS campaign because it ensures that the returns measured truly reflect the ads' effectiveness. Proper tracking allows advertisers to optimize bids and strategies, leading to better allocation of advertising budgets and improved campaign performance.
To set up conversion tracking effectively in Google Ads:
Common mistakes in revenue tracking include inaccurate tracking codes, incomplete data integration, and neglecting cross-device and cross-platform behaviors.
Avoid these by conducting regular audits, using comprehensive tracking methods, and continually refining the tracking process to adapt to changes in consumer behavior.
If your store generates online sales with a conversion value (or revenue per transaction), then target ROAS would work well. TROAS does not work if you're selling any free products, such as digital downloads and guides, because these products don't have any conversion value.
If your Google Ads account is brand new, stick with Manual CPC. You need at least 30 conversions to switch to an automated bidding strategy, preferably 50. Google needs your historical conversion data to understand which customers purchase at what costs. After 50 conversions, switch your bidding strategy to Maximize conversion value with a target ROAS.
Once you set a target ROAS at the campaign level, Google completely takes control over your keyword bids. Google will dictate CPCs for your entire campaign, regardless of any bid adjustments that you provide (except a -100% decrease in bids at the device level).
Any bid adjustments that you provide will most likely be ignored.
If you have a few keywords that aren't generating any revenue, Google will most likely no longer bid on those. If you have a few keywords that are contributing to a few purchases, then the algorithm will lower those keyword bids to decrease costs while increasing profits. If you have keywords that have been carrying your campaign, Google will increase bids for those keywords, in an attempt to invest in your highly profitable keywords.
Your tROAS will be reflected in the average ROAS of the campaign, not in the day-to-day results.
You set the target ROAS when you choose the "max conversion value" bidding strategy on Google. tROAS pushes Google to generate a specific return on your ad spend.
For example, you set tROAS to 500%, which means you plan to earn $5 for every $1 you spend. Therefore, tROAS also takes into account your order value.
Target CPA (Cost Per Acquisition) is set when you choose the "max conversions" bidding strategy. Google will adjust your bids to hit your CPA goal. You're asking for a specific costper conversion with tCPA. I.e: I want to spend $15 for a purchase! tCPA does not take your account order value into consideration.
To calculate tROAS, you'll need to know three key pieces of information:
Google sets the ROAS target as a percentage, so you'll have to multiply your ROAS equation by 100.
ROAS = (Revenue / Ad Spend) x 100
So, if your campaign spent $5,000 and generated $10,000 in revenue, the ROAS for the campaign is 200%.
If you want to spend $5,000 and generate $15,000, you would set your ROAS target to 300%.
You can set an automated bid strategy in any (or all) of your Search campaigns, Display campaigns, Shopping campaigns, and Performance Max campaigns.
Integrating target ROAS with strategies like Maximize Conversions or Manual CPC can enhance your ad performance by utilizing the strengths of each approach.
Use target ROAS when you're focused on achieving a specific return on ad spend, while pairing it with Maximize Conversions can drive volume, especially in growth phases. Manual CPC might be employed for precision, adjusting bids where automation won't suffice.
Target ROAS provides a structured approach to scaling campaigns, supporting long-term growth by allocating spend efficiently. Set realistic ROAS targets based on historical performance and gradually increase targets as your campaigns stabilize and deliver consistent returns.
Manage ad spend by monitoring performance metrics and adjusting budgets as needed to maximize returns. Ensure your tROAS goals align with your overall budget strategies, and be prepared to adjust targets in response to seasonal shifts or changing market conditions for optimal results.
Setting a tROAS only works for businesses that carry a dollar-value revenue. It won't work for any free products, including digital products and tools. This means that it's important for Google Ads to be recording revenue that comes in from purchases.
In the Google Ads dashboard, if your "conversions" metric is >1, but your "Conversion value" metric does not reflect the true value of the goods bought, then your product prices aren't linked to Google Ads. Make sure Google is recording the actual conversion value of a sale.
To fix this, go to Tools & Settings -> Conversions -> Purchases -> Edit Settings. Make sure your "Value" is set to "Use different values. If there's no value, use £1 (or any other number you want to put).
It’s important to note that the target ROAS bidding strategy will not work with lead accounts, though!
To follow up on the last point, proper conversion tracking is imperative for any of Google's automated bidding strategies to work properly.
Another common mistake is not having enough conversion data. Google's Smart Bidding thrives on data. Do not set a campaign up from scratch and set it to "Maximize Conversion Value." Google does not know what your values are at that stage, your actual ROAS, or who is most likely to buy at which costs.
Start with Manual CPC until you have 50 conversions in the campaign, and then switch over to Maximize Conversion Value, continuing with your Target ROAS strategy.
The benefit of having solid historical data is that you, as an advertiser, can use this data to make informed decisions. With tROAS, it's important not to shoot for the moon right away. If your current ROAS is 200%, push it up to 250%. Don't automatically set your tROAS to 900%. Doing so will cause Google to not deliver your ads.
The learning phase here takes about a week. After a week, if your tROAS is achieved, you can slowly increase your target by 20%. In the meantime, you can invest time in optimizing your Ads account.
When dealing with underperforming target ROAS campaigns, it's crucial first to identify whether your ROAS setting is too aggressive or conservative. Warning signs might include decreased conversion rates or unexpected ad spending. Once identified, adjust your target ROAS based on current performance metrics—lower it if your targets aren't being met or raise it if your performance exceeds expectations.
Additionally, consider the impact of seasonality, as consumer behavior often shifts with seasonal trends or events. These changes can influence campaign outcomes, requiring careful monitoring and timely adjustments.
By understanding these dynamics and responding proactively, you can optimize your campaigns for better performance and ensure they align with your business objectives.
TROAS works best if your products have similar ROAS performance.
If your Google Ads account has varying products with a wide range of prices, setting a Target ROAS can cause Google to focus only on a few of your highest return products. For example, if you have a product that is $8, while another product is $80, and you spent $4 to acquire each. The first product generates a very different ROAS from the second product (ROAS of 2 vs. ROAS of 20). Google will focus its budget on the second product since it's more likely to achieve your desired ROAS.
Although you'll still be making more revenue, you'll probably have a few products that are not generating any revenue through Google Ads, in this case. A solution for this is to group your keywords with similar ROAS by campaign, then run a tROAS in each of the separate campaigns.
Target ROAS is not the solution to your campaigns performing below what you expect. It is the push that some campaigns may need once it's exhausted all its other options. Do not expect a poor-performing campaign to perform well if you include a target ROAS suddenly.
In addition to all of this, you're also able to choose the "Maximize Conversion Value" bidding strategy without a tROAS. This could be a good idea to start off, while you get an understanding of your campaign's ROAS as a whole. Once it performs well without a tROAS, then you can confidently set a target ROAS.
Increasing revenue does not mean that Google is increasing spending. In this case, Google is actually spending less to acquire higher revenue. Therefore, as you continue to increase your tROAS, you may see a dip in spend. This can make it tricky to scale using tROAS, as increasing your target may not necessarily push your Google Ads campaign to spend.
If this is happening, it's a good idea to run the campaign at a Max Conversions to ramp up spend. Once spend is high enough, you can switch it again to a tROAS. Switch it back again once you see that spend is low again and you want to stop spending at a high cost.
When managing Google Ads campaigns, it's crucial to dispel common myths surrounding Target ROAS.
Advanced optimization of Target ROAS campaigns involves refining strategies to maximize effectiveness.
When running a target ROAS strategy, it is crucial to focus on specific KPIs such as conversion value, cost per action (CPA), and conversion rate.
These metrics help assess the effectiveness of your campaigns in achieving the desired return on ad spend. Consistently monitoring these indicators allows you to make data-driven decisions and optimize your overall strategy.
Analyzing sufficient conversion data is vital for spotting trends that can inform future ROAS goals. Use past performance insights to identify patterns in customer behavior and adjust your strategies accordingly. Regularly review and update your ROAS targets based on these findings to maintain campaign effectiveness.
Understanding attribution models is essential as they impact ROAS calculations and allow you to implement smart bidding strategies.
Different models allocate credit to conversion paths in varied ways, affecting how you interpret campaign performance. Choose an appropriate attribution model to ensure accurate ROI measurement and better-informed bidding decisions.
Although there are a lot of nuances when it comes to setting a Target ROAS on Google Ads, it is a valuable tool for businesses looking to generate a specific return on their ad spend. Depending on your business objectives, it's a great idea to dive into different bidding strategies, leaning on Google's automation to drive your efforts.
By setting a target ROAS, you can push your campaigns to work towards your business's goals. Gain the centralized clarity you need by turning to Triple Whale, the purpose-built ecomOS for brands and agencies—get it today.
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