Google Shopping Target ROAS | How to Calculate Your ROAS for Maximum Profit
In this video, you’re going to learn how to calculate your breakeven ROAS for your Target ROAS Google Ads bidding strategy, and how you can guide Google to make your campaigns profitable.
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With target ROAS bidding strategy, Google optimizes your ads towards meeting a target return on ads spend. With this type of AdWords bidding strategy, Google will decide on how to set your bids based on real time data. And for this to work, you have to ensure that you assign a value or target for your conversions. If you use Target ROAS, you're basically telling Google what kind of return you are aiming from your ad spend as a percentage.
How to calculate Google Ads target ROAS for your Target ROAS bid strategy? It's very simple and all you need is your calculator.
First, you need to calculate your profit margin. Then, divide 1 by your profit margin.
Formula:
1 ÷ your profit margin = Breakeven ROAS
For example: 1 ÷ 0.3 = 3.33
This means that if you're getting 3.33 in your campaigns, then it will break even and anything above 3.33 means you're getting profits.
Your breakeven ROAS is going to be your reference point when setting your ROAS for your Target ROAS bidding campaigns. Of course, you want PROFITS so I recommend that you experiment and start your target ROAS campaign with a value that is above your breakeven ROAS to encourage Google to make your campaigns be more profitable.
In this example (with a profit margin of 3.33), you can set your ROAS to 4 or even 4.5, depending on the current ROAS you are getting and the performance of your product in the market.
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