Whatever your brand is spending on Facebook ads, it better be coming back with a tidy return on investment! In this post, we break down what a good ROAS looks like and how discounts can help you get there. 

What Is A Good ROAS for Facebook Ads? Do Discounts Help?

If you’re not running Facebooks ads, you’re missing out on huge opportunities to engage audiences, boost awareness, and grow your business exponentially. Facebook ads have the potential to reach 2.96 billion monthly active users through customizable features and analytical tools. These advanced tools can help you discover your ROAS, or Return on Ad Spend, which is essential to determining your ad performance. But what is a good ROAS for Facebook Ads and does offering discounts help you meet revenue goals?

It can be tricky to optimize your ROAS and know what an acceptable number is since many factors are at play, including partner or vendor costs, affiliate commission, clicks and impressions, and discounts. So, let’s take a deeper dive into some top tips and info to help you maximize your ad performance and cost efficiency.

What is ROAS and Why Does it Matter? 

A brand’s Return on Ad Spend (ROAS) is a metric that measures the effectiveness of a digital ad campaign. Luckily, the formula to find this number is fairly simple:

ROAS = Total Revenue of Ad Campaign / Total Cost of Ad Campaign

So, let’s say your sales are worth $5,000 and you spent $1,000 on ads; your ROAS would be 5. This means that you’ve earned $5.00 for every $1.00 that you’ve spent on marketing. Just know that this number could be more or less specific depending on the insights available to you.

Be careful not to confuse ROAS with ROI, or Return on Investment. ROAS shows if an ad campaign is effective, while ROI lets marketers know if the campaign is profitable. ROAS is still one of the most important KPIs for any business, and here’s why:

• Helps to Avoid Big Losses – If an ad campaign just isn’t reaching goals, then the teams need to know sooner rather than later to either make adjustments or try another route altogether. 
• Improves a Brand’s Overall Performance – ROAS can tell you a lot about your audience and buyer motivation, which can then lead you to make decisions that improve sales.
• Wows Decision Makers – A good ROAS can impress higher-ups and potentially generate bigger spending budgets.

What’s a Good ROAS for Facebook Ads? 

While this number will vary by industry, a general rule of thumb is to aim for a 4:1 ROAS ratio.

As mentioned above, this means that for every dollar you spend, you would get 4 back.

We highly recommend that marketers keep a constant eye on their ROAS since there are many variables that can affect it, including:

• Seasonal Changes – Holiday campaigns, especially multi-day sales like Black Friday, will show dramatic changes and require you to revisit your goals and budget in order to achieve an accurate ROAS. 
• Shifts in Target Audience – Narrowing or broadening your target audience (without tweaking your campaigns to reflect this) will most likely result in a decrease in ROAS, as your ad will not be reaching the right people.
• New Goals – If you have a long-running ad built to drive sales, but you’ve recently decided to switch your goals for brand awareness, you simply won’t be hitting those new goals. Be aware of new KPIs to adjust your campaigns.

How Can Discounts Boost Your ROAS? 

Although it’s crucial to create eye-catching and creative ads, well-planned discounts, especially during the holidays, can increase your ROAS substantially. An attractive sale or discount can boost short-term sales and conversions across the board, but don’t go giving discounts randomly—strategy is key!

Make Discounts Desirable 

For some, a 5-10% discount just isn’t worth clicking. But to others, any deal is a steal. Since bargains are subjective, there isn’t a surefire number that produces the most sales. The “right” discount can also depend on each business’s inventory, margins, and how often they want to run discounts. However, the messaging of the discount can make all the difference. 

Author Jonah Berger of Contagious uses The Rule of 100 to predict consumer purchases: "The Rule of 100 says that under 100 percentage discounts seem larger than absolute ones. But over 100, things reverse. Over 100, absolute discounts seem larger than percentage ones.” 

Sound confusing? Don’t worry, it’s simple. For example: let’s say your brand decides to run a sale for $10 off a $40 shirt. You can either use the absolute amount of $10, or a percentage, which is 25%. The idea is that using the percentage of 25% will drive more sales as opposed to $10, since the percentage is a larger number and therefore seems like a better deal. Makes sense, right?

Target the Right People

It’s clear that leveraging discounts can help you figure out what is a good ROAS for Facebook Ads, but this can only happen if you target the right people. The type of discount brands offer should match their audience’s demographics and interests to be successful, and the Facebook Ads Manager offers excellent tools for reaching your audience. 

Businesses can create audiences with helpful tools like Audience Insights and adjust them by using criteria like consumer behavior, location, and demographics, including age, gender, and education levels. The more valuable info about your customers you get your hands on, the more equipped your brand will be to create messaging that motivates them.

Deploy Gorgeous Creative 

The best discount on the planet will get passed over if it’s not complemented by a beautiful, interesting creative to showcase how your product is unique and desirable. 

During the busy holiday season, when discounts are high and brands pull out all the stops, you can’t afford to skip out on the visual elements of your ad campaign. Your assets should be on-brand with eye-catching designs and paired with concise, positive copy that encourages clicks and shares.

Turbo-Charge Your Facebook Ad ROAS 

When asking yourself, “What is a good ROAS for Facebook Ads?”, listen carefully to the advice of seasoned experts. 

The team at Social Ktchn is well-versed in all things digital marketing, including crucial KPIs like ROAS. As a full-service digital marketing company, our deep knowledge of social media management tools, creative experience, and analytical approach allows us to craft successful campaigns and drive revenue for your business.

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