The Metric Problem in Digital Marketing
Walk into most marketing agencies and ask what's working. They'll show you click-through rates, impressions, follower counts, and engagement rates. Ask how many sales those impressions generated, and the room goes quiet.
Performance marketing is different. Every pound spent is accountable. And ROAS — Return on Ad Spend — is the number that proves it.
What Is ROAS?
ROAS measures the revenue generated for every pound spent on advertising.
Formula: ROAS = Revenue Generated ÷ Ad Spend
Example: You spend £1,000 on Google Ads and generate £4,000 in revenue.
ROAS = £4,000 ÷ £1,000 = 4X ROAS (or 400%)
A 4X ROAS means every £1 spent on ads returns £4 in revenue.
What's a "Good" ROAS?
This varies significantly by industry and business model:
| Industry | Minimum Viable ROAS | Target ROAS |
|---|---|---|
| E-commerce (low margin) | 4–5X | 7–10X |
| Service businesses | 3–4X | 5–8X |
| High-ticket B2B | 2–3X | 4–6X |
| App installs (LTV-based) | 1.5–2X | 3–4X |
The key is knowing your margins. A business with 20% margins needs a higher ROAS to be profitable than one with 60% margins.
Why ROAS Beats Other Metrics
Clicks: Traffic is worthless if it doesn't convert.
CTR (Click-Through Rate): A high CTR with a bad landing page produces zero revenue.
CPC (Cost Per Click): Low CPC campaigns targeting wrong audiences waste money.
Conversions: Without knowing the value of each conversion, you can't measure profitability.
ROAS connects all these metrics to actual business outcomes. It answers the only question that matters: Is this campaign making us money?
How to Improve Your ROAS
1. Improve your landing page conversion rate
The same traffic converting at 5% vs. 2% doubles your ROAS without changing your ad spend.
2. Target higher-intent audiences
Reaching people who are more likely to buy reduces wasted spend and improves ROAS.
3. Increase your average order value (AOV)
Upsells, bundles, and premium options increase revenue per customer, boosting ROAS.
4. Reduce your cost per click through quality score improvements
Better ad relevance and landing page quality lower your CPC, improving ROAS.
5. Cut underperforming campaigns
Regularly audit and pause campaigns, ad groups, or keywords that don't meet your ROAS target.
Beyond ROAS: Profit-Based ROAS
Sophisticated marketers go one step further — calculating profit ROAS (also called POAS).
Formula: Profit ROAS = (Revenue − Cost of Goods) ÷ Ad Spend
This accounts for your actual profit margin rather than gross revenue, giving a true picture of campaign profitability.
Tracking ROAS Accurately
ROAS is only as reliable as your tracking. Common tracking mistakes that inflate or distort ROAS:
- Not excluding VAT from conversion values
- Double-counting conversions (view-through + click-through)
- Attribution models that give all credit to last click
- Failing to track offline conversions (phone calls, in-store visits)
Set up accurate conversion tracking from day one. Without it, your ROAS figures are guesswork — and you'll be optimising your campaigns in the wrong direction.
Contact Us
📞 Phone: +92 344 3503901
📧 Email: sales@inteliwaregrowth.com
📍 Location: London, United Kingdom