ROAS Optimisation | Raising Return on Ad Spend

ROAS is return on ad spend — the revenue returned for every unit spent. It looks like a simple metric, but most decisions built on it turn out wrong because how it is calculated is misunderstood.

Revenue ROAS misleads

Standard ROAS is calculated on revenue and ignores margin entirely. A ROAS that looks high on a low-margin product may actually be losing money; a ROAS that looks low on a high-margin product may be profitable.

So when setting the target I first calculate the break-even point: at what ROAS level does your margin cover costs. The target sits above that. Industry averages floating around are meaningless without knowing your own cost structure.

The reality of returns and shipping

Return rate and shipping cost are the frequently skipped items. A category with a high return rate can look like the best-performing area of the account when viewed on revenue, while actually losing money.

Similarly, in shops offering free shipping, low-basket orders drag profit down even when ROAS looks fine. When these items are not reflected in conversion value, the algorithm promotes the wrong products.

The levers that raise return

The first lever is product selection: concentrating budget on high-margin products that convert. This requires separating product groups on the Google Shopping and Performance Max side; if everything sits in one campaign, that separation is impossible.

The second is basket size: getting higher-value orders from the same ad spend raises ROAS directly. The third is conversion rate: every visitor lost on the page is a click you already paid for.

The fourth is cutting wasted spend. Moving non-converting searches to the negative list raises ROAS quickly, because the denominator shrinks.

Balancing target ROAS against volume

Raising the target increases return but reduces volume — the algorithm enters fewer auctions. Setting the target too aggressively can nearly stop the campaign.

The right approach is gradual: move the target up from current performance in small steps and watch volume at each one. If your goal is growth, more sales at a lower ROAS may be right; if your goal is profit, the opposite. That is a strategic choice.

How do we start? First I look at your real margin structure and your current conversion value setup. We work out your break-even point and a realistic target together. You can reach me from the contact page.

Frequently Asked Questions

Should I track ROAS or ROI?

ROAS only accounts for ad spend, ROI for all costs. ROAS is practical for day-to-day campaign decisions; ROI is what you need when deciding whether the business is profitable.

How do I send margin data to Google Ads?

By bringing conversion value closer to gross profit instead of revenue. The method varies by stack, but the outcome is the same: the closer the value the algorithm sees is to real profit, the better its decisions.

Should I start a new campaign with a target ROAS?

Usually not. A target set before data accumulates can stop the campaign from serving at all. Accumulating conversions first and moving to target return afterwards is healthier.