Instagram is a hotspot for advertisers to use their creativity and churn out ads to promote their brands and products. 37% of marketers in 2022 used Instagram to increase brand awareness, and 35% of them used it for advertising their brand and product.
Calculating the return on ad spend (ROAS) becomes essential for marketers to understand how effective each ad campaign is. A good ROAS ensures that your brand is making profits and you are generating converting ads. But if the ROAS is low, you may need to tweak your ads to optimize them for more visibility and profits.
How to Calculate ROAS for Instagram Ads
Here is how you calculate ROAS for Instagram Ads to ensure maximum profits.
ROAS is the revenue generated on your ad campaign divided by the cost of the campaign. For example, if your company has spent $1000 on an ad campaign and generated $6000 in revenue, the ROAS is $6.
The results you get are in dollars to understand if your brand is making a profit. In the above example, you can also consider it as a ratio of 6:1 to check if the revenue is greater than the investment.
This calculation tells you about the clicks that are actually turning into conversions. If your company has a high CTR (click-through rate) but low conversion rates(CvR), you get an idea about what to do to increase conversions.
What is a Good ROAS for Instagram Ads?
Every industry has a different ROAS, and it is safe to say that there is not one single ROAS for Instagram ads that works well for everyone. However, generally speaking, the average ROAS for most industries is around 3:1.
The best deal for any company comes to around 4:1, where the profits are adequate, and the ad campaign can look into future ad campaigns to grow the company. The ROAS can go up to 7:1 or even higher if the ad campaign goes smoothly.
The average ROAS of Instagram ads is 8.83, which is a good number for sales and an adequate amount to invest in future campaigns.
How to Increase ROAS for Instagram Ads
Here are a few tricks and tips to increase your brand’s ROAS for Instagram ads to generate high profits.
1. Lower Ad Costs
The ROAS for Instagram ads consists of two components, the amount your company invests in an ad campaign and the revenue it generates on that amount. Understand the position of the sales funnel that you want to optimize and use methods accordingly.
If you want brand awareness, use methods that will help you gather a larger audience. But, if your brand needs higher conversion rates, you may need to invest more in your ads. This understanding simplifies the advertising strategy, and you have a well-structured financial plan.
A good way to save money on ads is to set up an automatic bidding system. With this bidding system, you never pay extra for your Instagram ads because you set an amount based on your precise needs.
You can also consider other automatic processes like automated ad placement to save on ad costs. This system allows Instagram to place ads based on the algorithm for where your ads will work best on the platform.
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2. Retarget Existing Audience
The probability of selling to an existing audience is 60%-70%, while selling to a new audience is 5%-20%. This shows how powerful customer retention is and how it can increase ROAS for Instagram ads.
Thus, marketers now focus on retargeting on Facebook and Instagram, making them the leading platforms for this practice. It helps re-engage users who already know about their brand and have already purchased from them earlier.
Retargeting keeps the existing hooked and increases ROAS for Instagram ads because conversion rates spike up tremendously. All you need to do is create a custom audience based on your account’s recent activity. For example, retarget consumers who have visited a product page in the last 30 days.
You can use other methods like Lead Forms and Shopping for better retargeting to increase ROAS and remind customers about particular products. Consider a reward program that benefits consistent users of your brand to acknowledge their contribution.
3. Use Strong Landing Pages
Knowing about a brand and looking at its products is the first step in the conversion process. If you want the audience to follow through the click and purchase from your brand, you must have a strong landing page that delivers.
Landing pages need to deliver what they promise on Instagram so that your audience gets exactly what they need. If your landing page promises to show your audience ten high-rise jeans, the audience needs to see just that.
Use straightforward landing pages so that the audience is not confused and can easily find products. Marketers face a 4.42% drop in conversion rates with high loading time, so make sure you use optimized and fast landing pages.
Invest in different types of landing pages to serve a specific purpose and help you increase ROAS for Instagram ads. Demo and consultation pages are the most popular ones at 42%, followed by 24% of sign-up pages and 21% of lead magnet pages.
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4. Use Different Types of Ads
Instagram is all about creativity, and using different types of advertisements can go a long way in generating high ROAS for Instagram ads. Reel ads are pretty engaging when used right.
Reels from accounts with 10 thousand to 50 thousand followers reached 6,243 users on Instagram. Additionally, accounts with 50 thousand to 45 million followers reached 47,851 users across the platform.
Use other types of ads, like carousel ads, to talk about your products in a detailed manner with several images or videos in one post. Carousels work better on Instagram by attracting a larger audience and increasing click-through rates.
Carousel story ads are beneficial too. One good example is the brand Lacoste, which received two times increase in online return on ad spend, compared to other ad formats. Other image ads like Instagram Shopping ads give high returns because they do not hamper the user’s scrolling experience.
Around 44% of shoppers use Instagram Shopping each week. These ads are best for showing your product catalogs to your users and increasing click-through rates. Understand the type of content that will work best for your brand and invest your time and effort accordingly.
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Make the Most of Your Marketing with the Good ROAS for Instagram Ads
Understanding ROAS for Instagram ads may be challenging, but things are easy with some research. A high ROAS ensures that your brand is reaching the right audience who are interested in investing in your company.
Look at different ways to reduce ad costs and invest in methods to increase revenue. Recognize the pain points where your company is investing the most money and understand how you can address them to lower costs.
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