Target CPA Vs Target ROAS Differences And Similarities [New Guide]
/ / / Target CPA Vs Target ROAS: Differences And Similarities [New Guide]

Target CPA Vs Target ROAS: Differences And Similarities [New Guide]

Two of the common ways to automate your biddings in Google ads are Target CPA and Target ROAS.

They can be both great tools to save your time and optimizing your bids automatically, based on specific metrics like time of the day, device type, age group, etc.

But what’s the difference between them and when one can be more useful than the other.

What Are They in General?

Target cost-per-action or Target CPA is one of seven Google ads smart bidding strategies.

It is the total cost of advertising per sale.

For instance, if you want to sell some products for $80 each and you want to spend $20 for ads to make a sale, your CPA would be $20 or less.

This strategy is primarily designed to bring you as much conversion as possible by not exceeding the maximum price that you set for it.

Even if setting CPA value can optimize your bids most of the time, you shouldn’t set it and forget it because sometimes those conversions may go above or below that point. 

So, you have to monitor that from time to time.

Target return on ad spend or Target ROAS is a metric to find your average converted value for your ad spend.

For example, historically you have been spending 15,000 dollars to gain on average 30,000$ in revenue.

Your average target ROAS now $30,000/$15,000 or 200 percent.

This number can also fluctuate depending on several factors.

So, you have to keep an eye on them as well.

What Are Their Common Features?

It is the key point here.

Because almost 90 percent of the time Target CPA Vs Target ROAS have similar characteristics and work in the same way.

Below we have listed some of their similarities.

  • They both work automatically in order to meet your target goal. Considering different factors like device type, location, age, gender, etc. for choosing optimal bids.
  • Before setting up your Target CPA or ROAS campaigns, you need to set up conversion trackings to give Machine learning enough data. Once it receives that data, then the AI can bring you the best conversions at the best possible price.
  • When setting your values you should be realistic in setting them. Look at your historical averages to make reasonable decisions. Sometimes putting values too low for CPA or too high for ROAS can reduce the volume of traffic drastically. So, if you want to achieve some conversions with your campaigns, you should make your CPA or ROAS values close to their historical averages.
  • You have to monitor them both from time to time. Your targets are not guaranteed to be as exactly as you set them. They can easily go 5 to 10 percent higher or lower.
  • Even if Google requires you to have 15 or 20 conversions for your campaigns to run, in order to achieve better results you need at least 50 conversions, but 100 would be ideal.
  • As we have talked earlier, you need to monitor your conversions over time by reducing your target CPA amount or Increasing target ROAS value as things go well.
  • As Google says, you need to prepare yourself for initial losses. So, making a loss or not making a profit is fine at the beginning of the process.
  • For learning the progress, the AI algorithms need some time to test. On average a learning period may last for a week or so. But if you have enough conversion data, it can be reduced significantly within two or three days. However, there are some instances that a learning period can last for a month or two. Because some people put their target CPA or ROAS quite unreasonable, as a result, they can receive very little traffic.
  • As the Standard bidding strategy targets a single campaign, you can also use the Portfolio bidding strategy to target multiple campaigns at the same time with the same bidding method.
  • Seasonality can also play a role in getting enough traffic and testing your campaigns. For example, in the busy seasons, your CPA and ROAS strategies may bring profit, but in the slow seasons, they may not work profitably.  
  • Making some changes to your landing pages or product lists may affect your bottom line. Those changes may affect the user experience and in turn your conversions.
  • You need to first start using them with the campaigns that generate the most traffic. Because they quickly give a signal with the least amount of loss.
  • You can set a maximum and minimum bid for both of them from the Portfolio bid strategy. You can set them by going to Tools&Settings and under Shared Library menu Bid strategies. But setting bid limits for CPC is not good. Because you will be limiting the ability of the algorithm for finding optimal keywords in other prices outside the set boundaries.

What Are Their Differences And Which One Is Better?

Which kind of businesses can use them?

Target CPA may not be good for big e-commerce websites that have thousands of products with different price variations.

Because you need to make a lot of campaigns for each product group at different prices.

If you don’t do this, certain prices can be profitable for some product categories, and others may face a big loss.

That’s why you need to run your campaigns separately and divide your product groups.

For instance, you have product groups that cost from $15 to $25 and $65 to $90.

And you set your target CPA for $35.

You may see some profit from one side but the other side can eat that profit.

If you have a small website with a few products in it, it is very manageable and you can run this strategy without too much headache.

Can big websites use Target ROAS?

I think they can use it. 

Regardless of the price of a product you need to make an X% amount of return from the ads you spent. 

In the majority of cases, it is fine to gain the same return from all of the ad expenses.

But, if you want to make exceptions and want different returns from certain products, you can run your separate campaigns as well.  

 Differences in business goals

Some businesses focus solely on conversions.

When calculating their bottom line, they need to deduct expenses like Product cost and target CPA values from their Total Revenue to see their bottom line.

And they are fine with that, even if it takes some of their time and workload.

For other people, they want to gain a certain percentage return for their expenses and they want to know only that. For them, target ROAS can be a good option.

Conclusion

In your PPC advertising, you can get great value if you use these two strategies wisely.

We have given most of the common similarities and differences between them.

Make sure to follow some of those guidelines and test your campaigns for 2 to 4 weeks to learn using those strategies.

What other differences do you know about the two strategies?

Let me know in the comments section below…

If you need any help in your PPC management, you can reach out to us through our Contact Us page.

Share it

Similar Posts