If you’re keen on enhancing the profitability of your paid search campaigns, prioritizing the effectiveness of your advertising spend is essential. Google provides several Smart Bidding strategies to help you achieve more conversions within your budgetary comfort zone. But for those aiming to specifically amplify their return on investment, Target ROAS (tROAS) bidding might be the strategy to consider. This automated bidding approach isn’t a universal remedy for profitability in Google Ads for every advertiser, but it has the potential to significantly boost the financial outcomes for many. In this blog post, I will explore:
- What is Target ROAS?
- How Does Target ROAS Work in Google Ads?
- The Key Values of tROAS for PPC Campaigns
- How to Track and Measure the Success of a Target ROAS Campaign?
- Dealing With Challenges and Pitfalls with Target ROAS?
What is Target ROAS?
Target ROAS, abbreviated as “tROAS,” represents “target return on ad spend” and is part of Google’s suite of Smart Bidding strategies. These strategies automate the bidding process by employing “auction-time bidding.” This means that Google optimizes for either conversion or conversion value in each auction you participate in.
Need a refresher of what ROAS is? Learn more here
How Does Target ROAS Work in Google Ads?
The function of tROAS is to maximise the revenue generate by your ad campaigns, whilst trying to minimise the cost of those campaigns. The target ROAS value (as a percentage) represents the average conversion value you expect for each $/£/€ in advertising spend.
Let’s say you plan to earn $7.50 in revenue for every $1 you spend, your tROAS target is 750%, which you enter into the tROAS check box and let Google do its magic.
For its part, Google optimizes your advertising bids to attempt to deliver the highest conversion value (in terms of revenue from sales) within your ad spend budget.
When you set a Target ROAS at the campaign level, Google assumes full control over your keyword bids. It will determine the cost-per-click (CPC) for your entire campaign, overriding any bid adjustments you make, except for a complete (100%) reduction in bids at the device level.
Your provided bid adjustments will generally be overlooked.
For keywords that aren’t generating revenue, Google will likely stop bidding on them. Conversely, for keywords contributing to some purchases, the algorithm will reduce their bids to cut costs and boost profits. And for those keywords that are the main drivers of your campaign’s success, Google will increase their bids, focusing on investing in your most profitable keywords.
The tROAS you set will be reflected in your campaign’s average ROAS, rather than in day-to-day performance metrics.
Letting Google optimise your bids is a good way to minimise the time it takes to manage your ad campaigns but it can also means you lose control and understanding.
Marketers often leverage third party data platforms to stay on top of their marketing metrics whilst using these automated bidding strategies. Some of these tools like Kleene.ai Marketing Spend Optimisation allow you to visualise and compare ROAS across all your marketing channels in one single view.
For small ecommerce businesses without sales teams or other resources, this is a great and simple way to power your business growth, assuming it all works.
The success of Goole automated bidding strategies depends on the quality of your data, and the volume of data available for Google algorithms to inform its strategy.
Setting up Target ROAS in Google Ads
You can set an automated bid strategy in your Search campaigns, Display campaigns, Shopping campaigns, and Performance Max campaigns.
Go to the “settings” of a campaign that is already running on Manual (or Enhanced) CPC.
Click on “Change Bid Strategy” under “Bidding
Choose “Maximize Conversion Value” as your bidding strategy
Enable “Set a target return on ad spend”
Set your desired ROAS as your Target ROAS
The Key Values of tROAS for PPC Campaigns
Since you want better results for your PPC campaigns, tROAS is useful in boosting underperforming campaigns where you can’t identify what the resistance is. To maximize returns you will need to ensure:
- That you assign values to the different sales or lead types.
- Calculate final sales values for complex products
- Calculate conversion values per sale
- Maintain control on uncapped spending
Track and adjust your tROAS figures in relation to changes to these metrics, and as you gain experience from previous or ongoing campaigns. While tROAS is automated, it is not something for a novice marketer to leave running unmanaged.
What Are the Best Practices for Implementing Target ROAS in Google Ads?
There are endless online articles about maximizing your return on tROAS, but the same points crop up in each of them.
- Build up a basis of data before starting your tROAS campaigns, otherwise, Google has nothing to work on. (at a minimum, 15 transactions per 30 days of a campaign is recommended)
- Start with a practical value for tROAS and scale up in future campaigns, rather than shooting for the moon on day one. (500% is the typical ballpark tROAS figure)
- Lower-value funnels and product campaigns, if possible, are your best starting point before scaling up to higher-value campaigns.
- If you have a mixed range of products or services, a portfolio campaign approach is recommended (once you have gained some simpler tROAS experience)
- Expect changes from other approaches such as tCPA, due to different numbers, goals and Google AdWords’s own quirks.
- tROAS is a moving target and should not remain a fixed constant as your business grows, markets change and advertising conditions evolve.
How to Track and Measure the Success of a Target ROAS Campaign?
The first step of this process is to give the campaign time to run and not overreact to early results or changes. Evaluate the performance of a campaign over a period of weeks or a month, giving the strategy time to adapt to the live ad-market environment.
You can measure the performance of different efforts by running experimental campaigns to get a feel for the ad market, against other types of revenue metrics, and using different values. Compare the results after a reasonable run rate to see what works best.
Always remember that a lot is going on under the hood of AdWords campaigns. Your tROAS changes might not be caused by a variation in results, many other factors play a part, especially over longer periods of time.
Dealing With Challenges and Pitfalls with Target ROAS?
The main issue any marketer will have with tROAS is a lack of recent data to power the Google AdWord system. Last year’s data might be irrelevant and five conversions last week is a statistical blip.
Another pitfall is being too ambitious with your first campaigns and expecting them to blow CPA or other methods out of the water. tROAS is not a magic bullet on the road to riches but requires the same amount of focus and effort as less-automated tools.
On Google’s side, there’s the risk that if you have multiple adverts or products, AdWords can focus on the one that is most likely to deliver the required results, so you could be missing out, which is why constant vigilance is required by tracking sales results. There is also the chance that Google could change how the tROAS process works, or update the whole AdWords feature set in future, as it has done before.
Finally, if the product, the landing pages, the sales site, or customer service isn’t up to scratch, you won’t get the sales no matter how good the tools are.
Summary: tROAS for the Win
While setting a Target ROAS on Google Ads involves many subtleties, it’s an effective instrument for companies aiming to achieve a precise return on their advertising expenditure. Tailoring your approach to your business goals, exploring various bidding strategies, and utilizing Google’s automated systems can significantly enhance your campaigns’ effectiveness. Implementing a target ROAS helps align your campaigns with your business objectives.
For smarter insights on your Marketing Spend consider using Kleene.ai to assess the performance of your marketing campaigns.