Want to increase your Google Ads ROAS?
In this guide, I will explain what good ROAS is, the correct way of calculating it—including its advanced variant, POAS—and share 22 tactics that have genuinely made a difference for my clients.
What is ROAS?
ROAS, or Return on Ad Spend, measures how paid ads perform as a ratio of ad revenue to ad costs.
Most ad platforms offer the ability to track ROAS for each campaign, ad group, ad, and even keyword, by dividing the attributed revenue by cost.
But is it as simple as dividing revenue by cost? And are there better ways of approaching return? More on this in the next section.
How to calculate ROAS?
At the surface level, if you’re spending $1,000 and generating $10,000 in revenue, your ROAS equals 10.
But don’t forget to take into account other costs such as partner or vendor fees, production costs, employee costs, and platform costs.
Alternatively, you can use a more advanced approach of tracking and optimizing for POAS (Profit on Ad Spend), which helps you track return on gross or even net profit and optimize towards the highest profitability.
To do this, you can set up a blanket margin percentage, say, 50%, and add it to your campaigns manually.
Your custom metric would be revenue times 0.5 equals profit, or essentially half of your revenue.
A better and more accurate approach, however, would be to add this data dynamically. You can do this through Google Tag Manager (requires a developer) or a do-it-for-you tool like ProfitMetrics.io.
What is a good ROAS?
In my opinion, a good ROAS starts at 3. But the higher the better 🙂
Gross margins rarely exceed 50% for most businesses according to this analysis by the NYU Stern School of Business.
Considering this, ROAS below 3 usually means barely breaking even.
As for the upper bracket, the highest account-wide Google Ads ROAS I’ve seen is 20. But I don’t doubt that achievable ROAS can be considerably higher, as it depends on the product, market, level of optimization, and budget.
Note: Always take your customer lifetime value (CLV) into account when assessing your ROAS and account performance. Repeat purchases can increase the initial return and paint a different picture.
Also remember that in general, after exceeding six figures in spend on Google Ads, the ROAS gains are considerably smaller, which often leads to lower ROAS.
How to increase Google Ads ROAS?
Now that you understand what a good Google Ads ROAS is and how to calculate it, let’s discuss how to increase it. All of the 22 tactics can be grouped into 5 categories:
- Reduce your wasted or low-ROAS ad spend (3 tactics)
- Improve your campaigns’ results (6 tactics)
- Focus on best-performing products (3 tactics)
- Improve your conversion rate (5 tactics)
- Improve your average order value and customer LTV (5 tactics)
Reduce your wasted or low-ROAS ad spend
To me, improving Google Ads ROAS always starts with optimizing wasted or ineffective spending. Sometimes, the smallest optimizations can drastically increase your ROAS.
Here are the 3 tactics I’d recommend.
1. Review your search term report and add negative keywords
This is one of the most basic and yet one of the most overlooked points.
You can’t improve your ROAS if you’re constantly wasting your budget on irrelevant search terms.
Having audited accounts that wasted tens of thousands of dollars per month on completely irrelevant searches, I can tell you that wasted spend adds up quickly.
Remember to use this free N-grams script and incorporate monthly N-gram reviews to help you identify your best and worst-performing search terms.
2. Suspend underperforming keywords
You should consistently monitor your keyword, ad group, and product group results, evaluate them, and make necessary changes.
Segment keywords and product groups into distinct ad groups for enhanced tracking, better ad customization, and budget allocation.
Suspend them if you can’t improve the results. But, do this carefully, as radical changes can negatively impact the performance of your whole account (especially true for Google Shopping).
3. Focus on higher-ROAS campaign types
Focus on higher-ROAS campaign types, but don’t neglect the campaigns that generate demand or provide additional touchpoints.
It’s essential to strike a balance and consider the overall impact of different campaign types on your marketing funnel.
Improve your campaigns’ results
Once you’re done optimizing your ad spend, it’s time to ensure your campaigns are optimized for maximum results.
4. E-commerce: Optimize your product feed
Optimize your product feed – make your product titles keyword-optimized, write good product descriptions, and use the best product shots.
These steps can significantly improve your click-through rates and overall performance.
Check out this article on product feed optimizations for more tips.
5. E-commerce: Review Google merchant center and fix disapproved products.
Disapproved product monitoring is the foundation of a successful Google Shopping campaign and can be the primary reason for a huge drop in results if not done regularly.
Especially, when your best-sellers make up over 50% of your revenue.
Did you know that just 10% of your feed being disapproved can render your Dynamic Display Remarketing campaigns inactive?
6. E-commerce: Apply for seller and product ratings.
If you’re not collecting reviews, start now.
Product ratings can significantly increase your Shopping and Performance Max campaigns’ CTR, and therefore ROAS.
I always recommend judge.me for seamless (and cost-effective) product review collection.
7. Test different campaign types
Use campaign types that make sense but don’t limit yourself to just one.
Test Performance Max or Smart as a supplement to Google Search, Google Search or Performance Max as a supplement to Google Shopping, and Video or Display as a supplement to all campaign types.
Doing so could ensure extra touch points throughout the buyer’s journey with the potential to increase demand.
8. Reallocate budget
Allocate budget strategically to better-performing campaigns.
However, avoid limiting underperforming ones excessively. Consider accounting for your CPCs and leaving enough for at least 10 clicks per day.
If your budget isn’t enough to clear that click threshold for underperforming campaigns, suspend them.
9. Optimize your Google Ads account
High-impact ROAS optimizations include:
- Ad and asset group refinement
- Targeting revision
- A/B testing
- Bid cap optimization
- Campaign restructuring (aiming for a broader structure).
Find more optimization ideas in my Google Ads Checklist.
By implementing these optimizations, you’ll be well on your way to maximizing your Google Ads results and ROAS.
Focus on best-performing products
Focusing on best-performing products leverages proven demand, boosts conversion rates, improves ad efficiency, and optimizes budget use, maximizing ROAS.
Here are 3 tactics to try.
10. E-commerce: Optimize product coverage
Review your product performance and see if your best performers are getting enough impression/click coverage.
If not, test excluding low-performers, or moving them to a different campaign (i.e. a lower-priority Google Shopping campaign) to shift the focus to better-performing, higher-potential or higher-margin products.
Do keep in mind that Google doesn’t always shift focus as you want it to. Sometimes, excluding products leads to getting no traffic at all.
11. Create separate campaigns for best-performing products or services
Another way to optimize product coverage and ROAS is to create dedicated “best-seller” or “higher-potential” campaigns. This can help you improve your targeting, ad relevance, and budget control.
12. Change your focus
As mentioned in my Google Ads Checklist, it can turn out that Google isn’t the right channel for one of your services or product groups, but it could be a great match for another.
This is often the case with my clients, where we start by promoting multiple products or services and, as time goes on, end up refining or changing the focus to ensure the best results.
Improve your conversion rate
Improving your conversion rate means getting more sales for the same or lower ad spend. I highly recommend investing in it as even small uplifts can result in considerable improvements to ROAS.
13. Install session recording and heat map software
Start by installing session recording and heat map software on your site, such as Microsoft Clarity.
This will show you exactly how users are interacting with your site and where they are dropping off, so you can identify pain points in your conversion flow.
14. Optimize your landing/product pages
Take a hard look at your landing and product pages.
Are they cluttered? Confusing? Hard to navigate?
Optimize them to make the desired action clear. Remove distractions. Draw attention to calls to action.
For more information on optimizing e-commerce conversion rates, I recommend checking out Ezra Firestone’s videos. I saw his presentation at the 2021 Ad World Conference and found his suggestions to be the most practical and actionable for e-commerce.
15. Optimize your checkout
Examine your checkout process.
Do you offer guest checkout? How about free shipping? Do you include trust signals? Do you provide popular shipping or payment methods? Are the addresses auto-populating? I can go on 🙂
Look for ways to streamline and optimize your checkout so customers aren’t abandoning their carts.
16. Test different discounts
Test offering different discounts and promotions.
Chances are you will see low ROAS on the initial sale. However, if you’re optimizing for average order value and customer lifetime (discussed below), you will make it up through repeat business over time.
Promotions can also be a great way to re-engage previous customers. For many shoppers, promotions are often the only marketing messages that get opened and clicked on. (I’m also guilty of that)
17. Perform competitor analysis
Competitor research allows you to compare your offer to your competitors’, see where you stand, and improve. These improvements can include stock, variety, imagery, and the last but not least, price.
Price competitiveness is especially important for Google Shopping.
Google’s algorithm attributes a lot of weight to your product prices. Having a price of just a few dollars higher than your competitors could mean appearing at the end of the Shopping ranking and thus losing a high-click spot, and possibly a customer.
Improve your average order value and CLV
Similar to conversion rate improvements, boosting average order value and customer lifetime value increases revenue without added ad spend, increasing your return.
Below are the 5 tactics I consider the most impactful for boosting AOV and CLV.
18. Email and SMS campaigns
It’s easy to get started with email and SMS marketing, but excelling at them requires dedicated effort.
Improve your email and SMS campaigns by A/B testing copy and images, running exclusive promotions, and optimizing your abandoned cart and newsletter sequences, and don’t forget to pair it with this next tactic for maximum reach.
Remember to follow the proper process and incorporate statistical significance into your tests. See Dynamic Yield’s Yaniv Navot’s no-nonsense take on the right and wrong way to do email A/B testing.
19. Introduce remarketing
Think about it: The most recent email benchmark puts the average email open rate at 37.6% and click rate at 3.36%.
How are you going to reach your previous customers and increase their lifetime value if they don’t open or click through? And what about the potential customers who abandoned their carts and didn’t give you their emails in the first place?
You have to have remarketing.
By not doing remarketing you’re restricting your chances of connecting and re-connecting with customers.
A well-thought-out remarketing campaign includes different messages and creatives for different audiences and, ideally, different stages of the funnel.
20. Bundles and upsells
Single-item sales usually aren’t enough to get a good ROAS, even at high margins.
Bundles, upsells, and cross-sells are among the easiest ways to improve your average order value.
You can use plugins that automatically suggest products for bundling/upselling/cross-selling, but I recommend you do this manually and find the complimentary products that make the most sense.
Recommended app: Zipify
Here is a good case study explaining how 2 upsells contributed to over $2 million in annual revenue.
21. Loyalty programs
Loyalty programs are a win-win for both brands and shoppers.
Such programs provide shoppers with exclusive rewards and incentivize them to spend more and return for repeat purchases.
Examples include Amazon Prime, REI, Sephora’s Beauty Insider, and Grab Rewards.
See other loyalty program implementation examples by Yotpo – my go-to plugin for loyalty programs, with a free tier for those just starting out.
22. Expand your marketing strategy
This may seem counterintuitive, but optimizing other marketing channels will improve your Google Ads return on ad spend.
Successful engagement in SEO, email, video, Facebook ads, and other marketing channels improves your brand awareness, adds additional touchpoints throughout the user journey, and boosts your remarketing audiences.