The Challenge: From Performance to Profitability
For an online store like fitness-store.gr, increasing sales through Google Ads is a solid strategy. However, the profitability of a campaign based on ROAS (Return on Advertising Spend) does not always reflect actual net profitability. Many high-turnover products often have low profit margins, which limits the overall profitability of the store. The challenge was to shift from evaluating campaigns based on revenue to evaluating them based on net profit, aiming for a meaningful increase in overall profitability.
Strategy: Adopting POAS for Profitability
To address this challenge, we implemented a strategy focused on optimizing campaigns based on POAS (Profit on Advertising Spend) rather than ROAS. This required the creation of a new sales tracking mechanism in Google Ads that not only measured total revenue from transactions but also calculated the net profit from each sale.
To achieve this, we integrated the Cost of Goods Sold (COGS) for each product into the back-office system of fitness-store.gr, enabling us to calculate the profit of each sale. This calculation subtracted the total purchase cost of the goods from the total transaction value. As a result, the campaigns began prioritizing the promotion of higher-margin products, shifting focus from purely high-revenue items.
Implementation: Campaign Optimization with POAS
The successful implementation of this approach required close collaboration with the fitness-store.gr team to record accurate cost data and develop custom conversion trackers within Google Ads. These trackers were installed to incorporate profitability data into the campaign’s performance metrics, allowing the Google Ads algorithm to optimize campaigns for higher profitability rather than just increased revenue.
By focusing on promoting high-margin products instead of simply high-priced items, businesses can increase net advertising profit by 30-50%, as campaigns prioritize products that deliver greater profit per sale.
Focusing on promoting high-margin products, rather than simply promoting high-priced products, can increase a company’s net advertising profit by 30-50%, as campaigns focus on products that offer a higher profit per sale.
The Results: Increasing Net Profit and Promoting Profitable Products
By optimizing campaigns based on POAS, we achieved the following results:
- 40% increase in net profit from Google Ads campaigns.
- 55% increase in the promotion of high-margin products, making advertising efforts more efficient and profitable.
Now, fitness-store.gr focuses on products that not only drive revenue but also significantly contribute to the store’s overall profitability.
Conclusion: The Importance of Profitability-Based Optimization
The transition from ROAS to POAS proved to be a game-changer for increasing profitability. By prioritizing net profit alongside revenue, we successfully adapted advertising strategies to align with the real needs of the business. This approach ensures long-term sustainability and growth, making every advertising investment more efficient and highly profitable.
