In Google Ads, every click counts. While setting up your digital marketing strategies, how can you ensure you'll get only the right clicks that matter to you?

Imagine paying for an ad campaign that can follow user behaviour, adjust real-time changes and strategically allocate budget to maximize profitability.

That's what target ROAS bidding in Google Ads does.

As the best digital marketing company in Delhi, let's explain why your ad spend should only go on the clicks that genuinely matter and how target ROAS can transform your digital advertising game.

What Is Target ROAS Bidding?

Target ROAS, or 'target return on ad spend,' is one of Google Ads' smart bidding strategies. It uses AI and machine learning to allow advertisers to allocate a specific advertising budget and optimize campaigns for either conversions or conversion value.

In short, the Target ROAS (Return on Ad Spend) strategy automatically adjusts bids for each click to maximize the chances of achieving the desired ROAS.

Explaining Target ROAS in A Practical Scenario

Imagine you're running ad campaigns for footwear brands with basic and premium products. Suppose audience A uses basic category and audience B uses premium category of the footwear.

Now, the average product price is $100 while the profit margin is 50%.

·         Objective: You need to set a target ROAS of 200% ($2 in revenue for every $1 spent).

·         Observation: After testing the target ROAS, you observe – audience A delivers a ROAS of 300% while audience B underperforms with a ROAS of 150%.

·         Solution: In the first action, you can allocate more of the budget to Audience A, while you may refine targeting or ad creatives for Audience B or exclude it altogether.

Why Should You Use Target ROAS Bidding?

So, wouldn't you prefer a bidding strategy that can maximize profitability and efficiently allocate their advertising budget? If yes, here's an in-depth explanation of why you should test Target ROAS bidding –

1.    Linking up Bidding with Revenue Goals

Target ROAS allows you to bid for ad placements based on the expected return on each dollar spent. It directly connects ad performance to your profitability goals, ensuring every bid works toward driving measurable revenue.

For example, if you aim for 400% Target ROAS, Google or Meta will strive to generate $4 in revenue for every $1 spent on ads. Remember, your actual ROAS can vary as the target is just a goal.

2.    Optimizing Ad Spend for High-Value Conversions

Instead of focusing solely on clicks or impressions, this cutting-edge strategy prioritizes revenue-generating actions, such as purchases or high-value leads. Here, ads are automatically optimized to target users – separate budgets for higher and lower profit margins.

This means businesses with a diverse range of product catalogues and varied profit margins can allocate ad budgets more efficiently.

For example, you operate an e-commerce store selling mobile phones in basic and premium categories. Some phones are sold with higher profit margins, and others with lower margins.

Now, target ROAS allows you to set customized ROAS goals per product category to optimize your ad spending more wisely. You can also target users who are likely to buy flagship mobile phones.

As the best Digital Marketing Agency in Delhi, MMBO consistently enhances target ROAS bidding strategies to ensure that every advertising dollar you spend contributes to your profitability, regardless of the variation in your products or categories.

3.    Minimizing Wasted Budget

Other smart bidding strategies like Maximize Conversions focus solely on driving as many conversions as possible, prioritizing volume – regardless of their value.

On the contrary, target ROAS ensures your ad spend is directed toward conversions that generate the most revenue.

As a result, you don't need to worry about spending your budget on low-value conversions while enjoying driving profitable sales.

4.    More Control over Profit Margins

When your products have higher profit margins, you can set a lower target ROAS, while low-margin products may require a higher Target ROAS to stay profitable. This bidding strategy indirectly allows you to manage profit margins by aligning bids with your revenue goals.

This way, businesses with tight margins can ensure their marketing campaigns reach profitability thresholds.

5.    Campaign Efficiency with Automation

In this age of AI, target ROAS uses machine learning to analyze historical data, real-time user behaviour, and auction dynamics. It automatically adjusts bids to maximize revenue without manual intervention.

That's why target ROAS is great for well-established e-commerce businesses with historical data from previous campaigns to automate the process more efficiently.

6.    Audience Segmentation and Ad Targeting

By implementing target ROAS, you can identify which audiences generate the highest revenue and focus your efforts there. This way, you can gain insights into your business' potential customers into multiple groups and target different ads.

7.    Ideal for Scaling Campaigns

While optimizing your ad campaigns, target ROAS ensures you maintain a balance between scaling up and staying profitable. In this automated process, ads only bid aggressively where the system predicts high-value conversions. Thus, there is a higher chance of ad spend leading to proportional revenue growth without loss.

8.    Adaptability to market changes

With changing market conditions, user behaviours and constant competitions, target ROAS can adept bidding in real time so that your campaigns remain profitable.

For example, in the holiday seasons, target ROAS can automatically adjust your bids based on the dynamic market environment.

9.    Time-Saving Automation

Another great reason for going with target ROAS bidding is its automated bid adjustment process. As the leading provider of PPC Services in Delhi NCR, we can compare target ROAS with PPC campaigns. While managing PPC campaigns is often time-consuming, as we need to deal with several keywords and ad groups, target ROAS saves time through its automated bidding process.

10.                       Precision in achieving ROI goals

A lot of marketers prefer target ROAS to ensure they measure and optimize ad campaigns with a clear focus on your revenue goals rather than just vanity metrics like clicks or impressions.

Whether your ROI goal is 200% or 400%, this bidding strategy provides a clear, actionable framework for your desired return on ad spends.

When Should You Test Target ROAS?

As an E-commerce brandsif you are able to generate sales but struggle to generate profits in such case you can aline your biding accordingly business profitability  

Target ROAS is an effective bidding strategy, but it’s not a one-size-fits-all marketing solution. Hence, one should use it considering their business goals, existing campaign performance, budget and more.

Target ROAS can be a good fit if…

You have a successful e-commerce business: Businesses with a history of successful online sales can maximize return on investment (ROI) on their ads using the historical data from previous campaigns.

You have conversion tracking set up: This means you can access accurate data on purchase values, which is necessary for this strategy to work.

Your products have different margins: Businesses with a wide range of product catalogues and items with different profit margins can be benefited by using target ROAS to allocate ad spend more efficiently.

You have a limited budget with profitability goals: When you are on a tight budget but want to prioritize revenue-driven ad spend over sheer volume, target ROAS can be an effective marketing strategy.

Final Thought

So, should you say yes to target ROAS or not to ROAS? This question requires an in-depth assessment to determine whether target ROAS is the right strategy for your business. When used correctly, it can be a game-changer for paid advertising efforts. But if done wrong, it might lead to significant losses.

Hence, you should hire experts from MMBO, one of the best digital and social media marketing companies in Delhi NCR, that can take your marketing effort to the next level.

Would you like help setting up a Target ROAS strategy? Reach out to team MMBO today!