Whether you sell online courses, consumer goods, or digital subscriptions, ROAS is the performance metric that shows if your ads are pulling their weight. Focusing on how to improve ROAS ensures your advertising efforts contribute directly to profitable, sustainable growth.
At Nexalab, we live and breathe this challenge. Our knack for ROAS optimisation comes from digging into what makes consumer campaigns convert.
Whether you’re in fashion, skincare, wellness, SaaS, or digital subscriptions, the key lies in balancing immediate returns with long-term value. This article unpacks practical steps. So you can stop guessing and start scaling.
What is ROAS and How to Measure It?
Return on Ad Spend (ROAS) is the revenue generated for every dollar invested in advertising. It’s a clear snapshot of whether your PPC campaign is actually making money or just burning through your budget. Essentially, ROAS answers: are your ads delivering the goods?
The ROAS formula is very simple:
ROAS = Revenue attributable to ads ÷ Cost of ads.
For example, if you spend $1,200 on Google Ads and generate $3,600 in revenue, your ROAS is 3:1, or 300%. You can express it as a ratio or percentage, depending on what works for you. However, defining ad costs brings multiple and different perspectives.
This is why you might want to factor in agency fees, creative costs, or even a slice of your team’s time for a fuller picture. So, solid ROAS measurement starts with crystal-clear cost definitions. Then, consistency is key here. Decide what’s included and stick to it. Mix apples with apples each month, and you’ll avoid messy comparisons.
How to Calculate Breakeven ROAS?
To calculate breakeven ROAS, you can use this formula: 1 ÷ Profit margin.
But before getting too technical, let’s talk about the background. Breakeven ROAS, often called BEROAS, is the minimum return required to cover the direct cost of supplying your product.
Breakeven ROAS is the baseline you need to know if your campaigns are actually in the black. Fall below this, and you’re losing money, even if revenue’s coming in.
So, let’s say you’re running an ecommerce store selling premium skincare.
- Each set of skincare: $100
- Associated costs (produce, marketing, and shipping): $40
- Profit Margin: ($100 – $40) ÷ $100 = 0.60 or 60%
- Breakeven ROAS = 1 ÷ 0.60 = 1.67
This means your campaigns must return $1.67 for every $1 spent just to cover associated costs. Anything above a 1.67:1 ratio starts paying for the ads themselves. And, beyond that point, it contributes to real profit.
Key Factors that Influence Good ROAS
Based on our experience, a good ROAS depends on the context of your business. Yup, good ROAS depends on your specific situation. What’s brilliant for one business might be average for another. Understanding the key factors at play helps set sensible goals.
Let’s break down the factors here:
- Profit Margins: Profit margins are the big one. High margins mean you can hit profitability with a lower ROAS. Meanwhile, tight margins demand a higher return to stay in the green.
- Industry & Business Model: High-ticket ecommerce like custom furniture or wellness programs might aim for a 4:1 ROAS. Meanwhile, lower-margin categories like apparel could operate around 2.5:1. So, don’t just chase generic benchmarks. Your breakeven ROAS is your true north.
- Advertising Platform: Different channels yield different results. Google Ads, especially Shopping and branded search, often capture high-intent buyers who are ready to purchase. Meanwhile, Instagram and TikTok can work wonders for discovery, using lifestyle content to spark interest before a buyer even knows they need your product.
- Targeting Precision: Targeting precision is a non-negotiable factor. A sloppy audience selection wastes ad spend on the wrong crowd.
- Ad Quality & Landing Page Experience: Ad quality, from sharp visuals to compelling messaging, directly impacts engagement. And don’t sleep on your landing page. Because slow sites and weak CTA’s will kill conversions.
- Competition & Market Conditions: High competition and market conditions can spike costs, like CPC. This makes it harder to achieve strong ROAS. Broader economic trends also influence spending patterns.
- Customer Lifetime Value: Customer lifetime value (CLV) is another game-changer too, especially for subscription brands or those with strong loyalty. Even a modest ROAS can be profitable if it brings back a buyer who reorders every month.
- Sales Cycle Length: B2C buying cycles are often short. And sometimes just a few minutes. But that doesn’t mean the story ends at checkout. Smart brands focus on turning one-time buyers into loyal customers through post-purchase flows and retargeting.
7 Proven Strategies to Improve Your ROAS
Knowing the factors influencing ROAS is the first step; implementing strategies to increase ROAS is the next. But please note that ROAS improvement is a deliberate and ongoing effort. Here are our proven tactics if you want to use Google Ads, Meta, or even TikTok; wherever your buyers are browsing.
- Sharpen Audience Targeting: Get specific with your target audience. Use past purchase data to build lookalike audiences or retarget visitors who abandoned their carts. Target users by shopping behaviours, interests, or life stages to connect with buyers ready to act. Don’t forget to exclude past converters where relevant.
- Optimise Your Ad Creative: Test headlines, visuals, and CTAs relentlessly. Tailor messaging to your target audience problems. Professional for LinkedIn, engaging for Instagram ads. Use trust signals like testimonials to build credibility.
- Boost Your Landing Page Conversion Rate (CRO): The ad gets the click, the landing page gets the conversion. So, your landing page should feel like a natural next step from the ad; quick to load, clean to look at, and easy to act on. Ditch the clutter, highlight your top benefits, and make the “Buy Now” button impossible to miss.
- Use Smart Bidding & Manage Budgets Wisely: Leverage automated bidding like Target ROAS (tROAS) in Google Ads, but feed it good data. Always adjust bids by device or location and redirect the budget to top-performing campaigns.
- Refine Your Keyword Strategy: Focus on keywords showing clear intent for what you offer. Optimise long-tail keywords for niche searches. This means you need to regularly check your Search Terms report in Google Ads. It’s a goldmine for finding negative keywords and new opportunities to improve your PPC ads.
- Leverage Retargeting: Use retargeting on Google and Meta to stay top-of-mind with people who’ve visited your site but haven’t converted yet. Show them different messages based on what they looked at.
- Improve Your Tracking & Attribution: Ensure your conversion tracking is spot on. The purpose is to capture online and offline conversions, like phone calls or CRM-tracked deals, that started with an ad.
How Nexalab Helps You Achieve Better ROAS?
Nexalab’s ads management service helps consumer brands scale profitably. We crunch the numbers behind your ad spend, spot what’s working, and double down on what sells.
From Meta to Google to TikTok, we know how to connect with your buyers where they scroll. Then we sculpt PPC campaigns that respect those financial guard-rails. Our team restructures accounts for clarity, rolls out continual A/B tests on copy and landing pages, and monitors ROAS measurement in near-real time.
Beyond Google Ads and TikTok, we manage Meta and Instagram ads to keep your brand visible across every stage of your customer’s decision journey; from discovery to repeat purchase.
This is why transparency is at our core. Weekly sprints ensure under-performing segments are cut swiftly while budget flows to high-return opportunities. So you know the reasons behind every tweak.
Your Next Steps
Learning how to improve ROAS is one thing. Turning theory into dependable, month-on-month growth is another. The tactics above work best when they’re part of a disciplined, end-to-end process. That’s exactly what Nexalab delivers. So, if you’re ready to stop guessing and start seeing consistent ROAS improvement across every PPC campaign, let’s talk. Book a free discussion with our senior strategists here.
