ROAS and CPA targeting strategies: specifics of choice
The right targeting strategy should consider budget issues. Most marketers focus on two basic models: ROAS and CPA. The first represents the return on advertising spend, while the second represents the cost per action. Choosing the right targeting strategy directly impacts the bid allocation model.
Return on advertising spend
Return on advertising spend (ROAS) helps recoup every dollar spent on advertising. This strategy involves specifying in Google Ads the amount of revenue you want to achieve. And the metric should relate to the amount of advertising spending. This model is optimal for marketing campaigns with high conversion potential and return on investment. In addition, it will be in use when implementing remarketing campaigns.
A strategy based on ROAS provides the following benefits:
- maximise advertising revenue;
- focus on the most profitable niches to achieve results;
- the algorithm automatically adjusts bids to increase clicks on ads with high conversion potential.
Cost-per-action strategy
The cost-per-action (CPA) strategy tracks the price of each conversion. In this case, the algorithm determines the average cost per click that results in a specific targeted action, such as a purchase, site registration, call request, or other type of request.
Target CPA helps you optimise your advertising budget by limiting the price per click. Advantages::
- makes it possible to achieve a certain volume of conversions with clear cost control;
- the campaign will not go beyond the pre-planned marketing budget;
- it is possible to adjust the price of a click depending on the financial capabilities of the company.
This advertising rate strategy is most popular for businesses that focus on customer acquisition. It will be most beneficial for niches with high lead generation costs.
Targeting strategies: choosing for business needs
The key factor in choosing one approach or the other is the advertising objective. For example, ROAS is appropriate if a company wants to maximise the return on its marketing spend. At the same time, CPA helps control costs, which is important when budgets are tight. In both cases, the Google Ads service provides an intelligent approach to setting and adjusting rates. What’s more, rate changes are made in real time, making it possible to track return on investment and better control costs.
It is also important to consider the type of business. For example, CPA is most often chosen for direct sales, while e-commerce businesses prefer the ROAS strategy.
When implementing a CPA strategy, customer lifetime value (LTV) is an important consideration. It should drive the price per action, increasing the volume of conversions. In addition, improving the user experience when interacting with the company’s website can increase efficiency.
