I've been in marketing for over a decade now, and there's one question that never fails to pop up: "What's a good ROAS?"
It's the million-dollar question, quite literally in some cases. But here's the thing - there's no one-size-fits-all answer.
Your ideal ROAS depends on your unique business model, profit margins, and growth strategy.
Do you sell high-ticket items with hefty profit margins? Your acceptable ROAS might be lower than a business dealing in low-margin, high-volume products.
Are you in growth mode, willing to sacrifice short-term profitability for market share? Your ROAS targets might be more aggressive than a stable, mature business.
In this post, I'll list the factors that can influence what a "good" ROAS looks like for your specific business.
What is ROAS?
ROAS measures how effectively your ad spend turns into revenue.
You calculate it by dividing the money your ads generate by what you spent on them.
Think of ROAS as your advertising's report card - it tells you how well your marketing dollars are performing.
Why Measure ROAS?
ROAS reveals if your ad campaigns are generating revenue (and profit) or just draining your bank account.
It guides smart allocation of your ad spend across different platforms and strategies.
With ROAS data, you can track the performance of your advertising campaigns over time.
ROAS also:
- Informs which products to promote heavily in your campaigns
- Helps determine sustainable levels of advertising spend
- Reveals the true cost of customer acquisition through ads
- Guides pricing strategies for products featured in campaigns
How to calculate ROAS
You can calculate ROAS to measure your ad campaign's performance and justify advertising costs.
The ROAS formula is: Revenue from Advertising Campaign / Ad Costs
To calculate ROAS for your advertising campaigns:
- Sum up all revenue directly attributed to your ad campaign.
- Tally your total ad costs, including media spend, creative expenses, and campaign-related overhead.
- Divide the campaign revenue by the ad costs.
This ROAS of 5 (or 5:1) means you earned $5 for every $1 spent on your ad campaign.
You can calculate ROAS for specific time periods to track campaign performance over time.
By using ROAS data, you can compare different advertising campaigns and optimize your overall ad spend.
What Factors Influence Your ROAS?
Now that you know how to calculate ROAS, let's talk about what really affects it.
Your business model, goals, and market competition all play a role.
Here are the key factors you need to consider:
Industry and Product Type
Your industry sets the baseline for ROAS expectations.
Luxury brands might accept a lower return on their advertising investment.
Companies selling budget items typically need higher ROAS to remain profitable.
Consider how much profit your products generate when setting ROAS targets.
Business Stage and Growth Strategy
A company's growth stage also impacts its ROAS goals.
Startups often allocate a larger advertising budget for rapid growth, accepting lower ROAS.
Established businesses usually require higher ROAS to maintain profitability.
Align your ROAS targets with your current business objectives and revenue targets.
Customer Lifetime Value and Acquisition Costs
Don’t forget to factor in Customer Lifetime Value (CLV) when assessing your marketing metrics.
CLV represents the total revenue you can expect from a customer over the course of their relationship with your business.
A seemingly low ROAS might be acceptable if your customers have a high lifetime value (e.g. they come back and buy more).
Consider how your advertising investment impacts long-term customer relationships, and balance new customer acquisition costs against potential future revenue streams..
What is a Good ROAS Score?
A good ROAS score typically looks like a 4:1 ratio or 4x, which means for every $1 you spend, you’re bringing in $4 in revenue.
But this isn’t set in stone — different industries have different standards.
For some businesses, a 2:1 ratio is totally acceptable.
Your ideal ROAS depends on your profit margins and how much you need to keep your business growing.
What is a Good ROAS on Amazon?
When we’re talking about Amazon campaigns, the average ROAS tends to fall between 3:1 and 5:1.
This means for every $1 you spend, you can expect to bring in $3 to $5.
The sweet spot will depend on your product category and industry.
For instance, electronics tend to have higher ROAS than lower-priced items like accessories.
What is a Good ROAS for Facebook Ads?
A strong ROAS for Facebook ads usually falls between 2X and 4X.
So, you should be bringing in $2 to $4 for every $1 spent.
However, depending on your advertising dollar spend, some brands report ROAS figures as high as 10X.
As always, your industry and placement strategy play a big part in how well your ads perform.
What is a Good ROAS for Google Ads?
For Google Ads campaigns, a good ROAS is typically around 4X.
This means you’re earning $4 for every $1 spent.
However, Google Ads can have varying ROAS benchmarks depending on the type of campaign and your goals.
The key is to adapt your future advertising efforts based on your current results.
What is a Good ROAS for E-commerce?
In e-commerce, the typical ROAS ranges between 1.6 and 4.
In other words, for every dollar you spend, you should expect to earn between $1.6 and $4 in revenue.
This doesn’t include other costs like production and shipping, so remember that higher revenue doesn’t always mean higher profits.
How to Improve Your ROAS
If you're looking to improve your ROAS, it really comes down to testing a few strategies and seeing what clicks for your business.
Here are some practical tips that can work across different ad platforms:
1. Prioritize Your Best Performers
Spend more on the ads that consistently generate profit.
Shifting your budget to what already works reduces the risk of wasting money on creatives that don’t deliver strong returns.
2. Narrow Your Audience Targeting
Not every customer is worth targeting, and that’s okay.
By narrowing your focus to audiences that have already shown strong buying signals, you’ll spend less chasing uninterested people and more reaching those who are ready to convert.
3. Increase Your Ads' Appeal
Even the best-targeted ad won’t work if it doesn’t resonate.
Take the time to test different headlines, visuals, and offers. Find what grabs attention and gets people to act, and then refine those ads for better results.
4. Improve the Experience After the Click
Once someone clicks your ad, the experience doesn’t end there—it begins.
Make sure your landing page aligns with your ad and creates an easy, frictionless path for visitors to take the next step. The easier it is, the higher your chances of turning clicks into sales.
5. Adjust Your Bidding Based on What’s Working
Your ad spend needs to be flexible.
If you’re seeing good results with certain keywords or audiences, increase your bids there. At the same time, lower the bids for anything underperforming so your money goes where it counts.
6. Try Different Ad Formats
Different types of ads perform differently depending on your product and audience.
Experiment with a few formats to find which ones give you the best returns.
7. Keep an Eye on Performance
Regularly check your campaign performance metrics like conversion rates and ad spend.
Use what you learn to tweak your campaigns—shift your budget toward what’s working, and pull back on what isn’t.
What If Your ROAS Doesn’t Improve?
If your ROAS isn’t improving despite your best efforts, don’t sweat it. ROAS is just one part of the bigger picture, and there’s a lot more to business growth than chasing numbers.
If your ads aren’t quite hitting the mark, it might be time to focus on long-term plays like content marketing, gathering customer reviews, and boosting your SEO. These strategies may not turn heads overnight, but they build the kind of trust and loyalty that pay off down the road.
At the end of the day, a loyal customer base and solid brand recognition will carry you through—even if your ROAS isn’t skyrocketing just yet.
ROAS vs. ROI: What's the Difference?
Now that we’ve covered ROAS, let’s take a look at how it compares to ROI.
Return on Investment (ROI) looks at your total profit, taking all expenses into account.
ROAS, on the other hand, focuses strictly on how much revenue you’re generating from your ad spend.
Both are valuable, but ROAS zeroes in on the performance of your advertising efforts.
Conclusion
A good ROAS depends entirely on your business model, margins, and goals. There’s no magic number that works for everyone.
Your focus should be on balancing costs with returns, whether it’s through refining ad targeting or promoting higher-margin products. Every dollar you spend should serve a clear purpose.
If your ROAS isn’t meeting expectations, don’t view it as a failure. It’s just a signal to make adjustments—whether that means shifting your budget, refining your creative, or exploring different ad formats.
Remember, ROAS is a guide, not the whole picture. What really drives long-term growth is the trust and loyalty you build with your customers, far beyond any single metric.
