What's a good ROAS in 2021?
We get asked all the time, "What's a good ROAS?" or, "What kind of ROAS should I expect?" And we always have to respond with, "It depends." The reality is that these are actually complex questions and completely unique to each business.There is not a one-size-fits-all answer when it comes to what a healthy and feasible ROAS is for your business.
For example, a 2 ROAS may be phenomenal and completely doable for one business, whereas reaching a 5 ROAS could be a huge struggle for another. There is so much that goes into a successful Facebook advertising campaign and it is not as simple as asking "What kind of ROAS can a dog leash store get with Facebook ads?" 👀🤦🏼♀️ Honestly, without knowing that dog leash store's average order value or website conversion rate, I wouldn't have a clue and neither would any other Facebook advertising agency.
You must approach a Facebook ad campaign holistically, being aware of all the different parts that make up your campaign. There are TWO main aspects of your campaign you simply must consider:
1- What’s happening ON Facebook and those key metrics that indicate how well things are working on Facebook (such as link CTR), and
2- What's happening OUTSIDE of Facebook (such as conversion rate and average order value) and how well your website is functioning. Frankly, what's happening outside of Facebook, will ultimately determine what you can or cannot achieve with Facebook ads. If you don't have your website foundation dialed in, then you're going to be pushing a boulder up a steep hill. It's going to be HARD!
ROAS, or return on ad spend, essentially means how much money you are earning back with your ads. For a business with really good margins, generally a 2 ROAS is considered great. For a business with not so good margins, the ROAS might need to be a 5 to make the campaign truly profitable. That may or may not be possible with their particular business and ket metrics. If they have a low average order value, (e.g. $20), and their website conversion rate is low for that AOV, (e.g. ~ 2%), then it's going to be really hard, if not impossible to get to a 5 ROAS with Facebook ads. If that were your website foundation, your ads would need to achieve an unrealistically high link CTR to get enough traffic to your site...and that isn't always possible. In this scenario, that website conversion rate needs to be considerably higher (i.e above 5% if not higher) with a $20 AOV, which is more reasonable than expecting an unreasonably high link CTR.
Here's another example: let's say a business has an AOV of $150 and their website conversion rate is above 2.5%, then a 5+ ROAS is likely very possible. 😎 Even if you have “just okay” margins, this is basically a dream scenario with a TON of Facebook advertising potential!
The point is: a good ROAS in 2021 is going to be different for every business. This isn't something we, or any agency, can determine without knowing certain business metrics from you. Don't get too hung up on achieving a certain ROAS based on what you hear from other businesses. Focus on YOUR metrics and figure out what a good ROAS is for YOUR business.
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