Return on ad spend (ROAS)
A high ROAS does not guarantee profit: what matters is how much of those sales is left after their costs. Check whether your campaign pays for itself and the minimum ROAS you need.
Campaign result
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ROAS
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Break-even ROAS
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Contribution from sales
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Sales needed to cover the campaign
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How it is calculated
- ROAS = attributed sales ÷ ad spend.
- Contribution = incremental sales × contribution margin. Result = contribution − ad spend.
- Break-even ROAS = 1 ÷ contribution margin: below it, the campaign does not pay for itself.
Assumptions
- The contribution margin already takes out product cost and other variable costs, but not advertising.
- Incremental sales = attributed sales × share that would not have happened without the campaign.
- Does not include the value of future purchases by the same customer.