If you were using Enhanced cost-per-click (ECPC) for your Shopping campaigns in Google Ads, you should know that Google said that this option will be discontinued in October 2023. ECPC was a way to optimize your bids for conversions, but it is no longer the best option available.
Google Ads now offers more advanced solutions. One example is Target ROAS experiments, and you also have available Performance Max campaigns, which are fully automated bidding strategies that use machine learning to adjust your bids in real time. These solutions can help you maximize your return on ad spend (ROAS) and reach more customers across Google's network.
And of course, if you want to calculate the appropriate ROAS goal for your Google Ads campaigns, you should know these business metrics:
Average order value: average amount that customers spend with you when they buy from you
Customer lifetime value: this metric focuses on repeat purchases
Cost of goods sold: How much does the (average order value) product or service cost us directly to deliver that product and service
Transaction fees: If you are charging people in foreign countries or you are charging in different currencies and have to be converted
Shipping costs: Depends on whether you are selling internationally, domestically, or if you are a service-based business
Sales tax, import duties, export duties: Depends again if you sell internationally or not
Average refund rates: % of refund rate during the average order value period, converted into the number
Break-even amount: The profit that's left after counting for all the costs is the amount that we can pay on advertising costs in order to acquire a customer for break-even
Once you have your profit margin number, you need to determine how many times that number must be multiplied to hit 100% profit. That is your ROAS percentage goal.
For example, if your profit margin is 20%, then you need to multiply it by 5 to get 100%. That would mean your ROAS goal is 500% or €5 in revenue for every €1 spent on ads.