Digging deeper on ROAS goals

A higher ROAS isn’t always the best thing to aim for. Larger companies, or companies growing the most with their advertising understand that immediate profit on the first sale isn’t always necessary. Securing the customer is key! Their strategies focus more on both increasing the rate of returning customers and acquiring new customers through paid advertising rather than just attracting sales at the highest return.

Generally speaking, the higher the profit margin you aim for each sale, the smaller your market share becomes. This is because striving for a higher return means spending less and earning more. The challenge is that sales funnels consist of both ready-to-buy customers and those who need more convincing. The latter group costs more to convert as they may need to engage with multiple ads before making a purchase, and some may never convert at all. Additionally, some customers have a lower average order value. By instructing the algorithm to only target customers who are inexpensive to acquire and spend significantly, you're excluding a key part of your potential market. Consequently, setting a high ROAS goal can limit your ad spend and stifle growth.

The ideal approach is to find a balanced ROAS target that isn't too ambitious or too modest, allowing you to grow your ad spend sustainably.