undercover.co.id – RETURN ON AD SPEND , More Effective Thanks to AI , To avoid wasting money on advertising, brands must master the return on ad spend (ROAS) strategy. Technology can greatly assist this process of measuring advertising effectiveness. One that is trending is the utilisation of generative AI for ROAS. What does it look like?
In the midst of increasingly fierce business competition, companies are faced with the challenge of highlighting their uniqueness in the market. For this reason, many companies take the bold step of advertising heavily to reach a wider audience.
However, the most important thing is to ensure that every dollar spent delivers tangible results. It is not about the massive advertising investment made by the company, but how the advertisement is successful and can drive revenue, even increase profits. This is where return on ad spend (ROAS) strategy comes in, a metric that is at the heart of every successful advert.
ROAS is a metric used in marketing to measure the efficiency and effectiveness of advertising in generating revenue based on the amount of money invested. Simply put, the calculation of this metric reveals how much revenue an advert generates for every dollar spent in running the advert.
Unlike return on investment (ROI) which measures the total return of the entire investment made, ROAS only calculates the return from a specific advert. Also, the only cost considered in the calculation of this metric is the cost of advertising. While ROI measures the cost of the entire advertising campaign.
There are several reasons why this metric is so important for advertisers. Firstly, cost efficiency. This metric helps advertisers to identify what kind of adverts will deliver results that are worth the money spent. Secondly, performance evaluation. ROAS provides a clear and objective measurement of how well an advert is performing. This allows advertisers to measure the success of their strategy and optimise it for better results.
Third, goal setting. Setting ROAS targets allows advertisers to set more realistic goals to achieve. By understanding the desired ROAS ratio, they can align their efforts to meet revenue goals and adjust their strategies accordingly.
As technological developments have had a huge impact on the advertising world, there are many ways to maximise ROAS, namely with artificial intelligence (AI). The recent emergence of AI has sparked a revolution in the advertising industry, offering the right solution to optimise ROAS.
Elvira Jakub, Head of Industry at Google Indonesia explained that the use of AI in many companies has proven to be very effective. This is evidenced by a McKinsey survey titled The state of AI in 2022-and a half decade in review which revealed that the rate of AI adoption in the market has increased by 2.5x. “This indicates that more and more companies are seeing the positive potential of implementing AI in their marketing strategies,” said Elvira.
Then, as many as 70% of companies that have adopted AI report that their revenue has increased. Not only that, 26% of them revealed that their operational costs were reduced by implementing the technology.
According to Elvira, AI also plays an important role in terms of conversion. In the past, conversion was only measured in one parameter, but now, AI technology allows companies to determine different conversion values.
“For example, companies want to set a target for low, medium, or high conversion. They can set it according to their goals. AI technology allows them to calibrate their ads so that they can be directed to the right target, whether it is for customers who spend a large amount of money, or customers who frequently shop at the company,” Elvira explained.
In the context of ROAS, of course companies cannot ignore it. This is because this metric is the main KPI to assess efficiency indicators for marketers in some companies. However, with AI, companies can expand their view, from just efficiency to how to achieve overall business growth.
“Even so, ROAS must also be considered. Because this metric shows whether the advertising investment made by the company is providing revenue or not. However, use AI to achieve higher business growth,” said Elvira.
She gave an example, when a company wants to launch a new product, it is important not to focus only on ROAS. Rather, determine how many products you want to sell. Then, utilise AI to determine the best way to achieve the target. “ROAS should still be monitored to measure success. However, how much profit is generated should be the main goal,” added Elvira.
Learning from Case Studies
There are several case studies on the success of AI adoption in advertising campaigns. Vivek Thomas, Managing Director of AiSensum gave an example with the case of Uniqlo through one of its advertising campaigns, Shop The Look. As is known, this brand has thousands of stock keeping units (SKUs). After being analysed, there are 20 SKUs that contribute greatly to brand sales.
“From this data, Uniqlo also uses AI to find the perfect combination of these products. Through carefully selected product combinations, the brand creates what they call breakthrough combos,” said Vivek Thomas, Managing Director of AiSensum.
These breakthrough combos are then made to look like personas. For example, there are product combinations that are made suitable for teenagers. There are also products that are made suitable for office people. From there, Uniqlo then creates ads that are personalised according to the persona and targets them to the right audience. “Through these personalised ads, the ROAS of this campaign has tripled,” said Vivek.
Vivek then gave tips for advertisers who want to improve their ad performance on Google Ads. First and most important, is to run campaigns across multiple placements. Don’t just limit the campaign to one placement.
“For example, focusing on AI Google Display Network (GDN) only, and forgetting AI Performance Max to get conversions. In fact, Performance Max is used to drive performance based on the specified conversion target, thus providing more conversions. The point is, by running campaigns on various placements, the results of the ads can be better,” said Vivek.
Secondly, it is important to understand and utilise search-relevant keywords, websites or apps related to the advertised product, and audience profiles. By utilising these, the ads will be more relevant and more effective in attracting the right audience.
“Understanding search behaviour and audience preferences will give a huge boost to the performance of your campaign,” added Vivek.
Thirdly, utilising Dynamic Search Ads. This is the easiest way to find customers who search for advertisers’ offers on Google. “By utilising this technology, advertisers can create ads that are more engaging and relevant to the target audience, thus increasing ROAS significantly,” said Vivek.
In conclusion, by leveraging AI and understanding how to optimise various elements, advertisers can achieve higher ROAS and generate satisfactory results in their advertising efforts. The better the advertiser’s understanding of the target audience and the data used in the ads they run, the greater the potential for the ads to achieve success.
AI allows them to calibrate the adverts to be directed to the right target, whether it is for customers who spend a large amount, or customers who frequently shop at the company.
Head of Industry, Google Indonesia