Is it always true that the sales go down when we increase Target ROAS
On the outset it looks very weird that you are asking Google to increase Target ROAS, but still your sales go down. Does it not look ironic? Yeah, it is true in most of the cases.
There are a few important points to consider before setting up a Target Return on Ad Spend otherwise it can backfire your genuine intentions.
- Never set a Target ROAS till your campaign has got a learning for about 45 days.
- Target ROAS should not be increased too often as it restarts the learning curve of Google Campaign
What is the reason that the sales go down when you increase Target ROAS.
Let us understand this from the perspective that you are just asking Google to increase Return Percentage on the Amount you Spend on your Advertisement. Hear me again – you are just asking to increase the Return Percentage but you are nowhere forcing Google to spend more and still increase Return Percentage. It is just one parameter.
Let us take an example:
Before Increasing ROAS
Ad Spent: $5,000
ROAS = $10,000/$5,000 = 200%
Now, you increase Target ROAS to 300%
Now new figures may be like this:
Ad Spent: $2,500
ROAS = $7,500/$2,500 = 300%
So, Google Algorithm achieved it for you, but at the cost of low sales. It only targeted high converting sales, so it kept its promise to increase the ROAS to 300% but alas at the loss of your sales volume. You may have made more money per order, more money per dollar spent, but still you lost some sales which were costly.
The sales which google dropped were costly which means you were getting those sales but by spending more dollars. The conversion rate of those sales was low, so Google Algorithm obeyed your instructions, dropped the low converting sales, but kept the high converting sales to achieve what Target ROAS you were looking for.
How can I get best of both worlds: More Sales + More Target ROAS
Whether it is Smart Shopping for Performance Max, you have to make a very smart usage of the two parameters i.e. Daily Ad Spend Vs. Target ROAS. In between comes the learning of the algorithm, so any changes and algorithm needs data to learn.
Master these three things: you are the master of your budget and your sales.
Next you will hear from us:
- Is it safe to add new products in the Campaigns where it is already converting above 300%?
Any questions, feel free to email Vivek at: firstname.lastname@example.org
Vivek Chagti is having 20 years of eCommerce Development, Management and Marketing Experience