Target ROAS calculator
A target ROAS has to clear break-even. One divided by gross margin — with enough headroom for costs the margin excludes. Ten thousand of revenue on two thousand of spend at a 40% margin is a 5× ROAS against a 2.5× break-even, leaving 2,000 of profit.
How to set a target ROAS
Target ROAS bidding trades volume against efficiency, and the relationship is not linear. Raising the target squeezes spend into the highest-converting slices of the auction and volume falls away sharply past a point; lowering it buys progressively worse traffic. The usual approach is to start above break-even, let the campaign gather enough conversions to be stable, then step the target down ten per cent at a time and watch whether incremental profit is still positive. Large jumps reset the learning phase and produce a fortnight of noise.
Questions
Above break-even, typically by about a third, then step it down as actual profitability becomes clear.
Volume collapses. A high target restricts spend to the easiest conversions and leaves most of the profitable auction untouched.
Ten per cent at a time. Larger changes reset the algorithm learning phase and produce weeks of noisy data.
No. That is why the break-even figure derived from margin is the reference point.
Usually one to two weeks, or until the campaign has gathered enough conversions to leave the learning phase.