Why ROAS Targets Kill Ecommerce Growth (and What to Use Instead)

Every Ecommerce brand we speak to has a ROAS target. “We need 4x.” “Our board wants 6x.” “Our last agency promised us 8x.”

These targets are almost always arbitrary — pulled from a finance spreadsheet, not from a real understanding of customer lifetime value, margin mix, or how your Google Ads campaigns interact with organic and direct traffic.

The Problem with ROAS Targets

When you set a Target ROAS in Google Ads, you are telling the system: “I only want conversions that hit this multiple.” The algorithm complies. It becomes conservative. It stops bidding on queries where there is real purchase intent but where the predicted conversion value is slightly below your threshold.

The result: you maintain your ROAS number. You also leave revenue on the table every single day.

The bigger problem is that ROAS is a blunt instrument. It does not account for margin differences between products. A 4x ROAS on a low-margin commodity SKU might be unprofitable. A 2x ROAS on a high-margin hero product might be extremely profitable. Running both under the same Target ROAS means you are optimising for the wrong thing.

What Profitable Ecommerce Growth Actually Requires

The metric that matters is contribution margin — what is left after you subtract product cost, shipping, returns, and your ad spend. Some brands call this MER (Media Efficiency Ratio) at the account level, or nCPA (new customer acquisition cost) when they are focused on building the customer base.

This is more complex to track, but it is the number that maps to actual business health. A brand generating $2M/month at a 4x ROAS but with 60% COGS and 15% returns is in worse shape than a brand doing $800K/month at a 2.5x ROAS with 40% COGS and 5% returns.

A More Useful Bidding Framework

For most Ecommerce brands we work with, we move away from portfolio Target ROAS and toward:

1. Product-level margin segmentation — different ROAS targets (or Max Conversion Value bids) for high-margin versus low-margin SKUs
2. New customer vs repeat purchase differentiation — using customer match to identify repeat buyers and bid differently on them versus new customer acquisition
3. Account-level MER tracking — total revenue divided by total ad spend, reviewed weekly, with the understanding that Google Ads does not get credit for 100% of the revenue it influences

This framework lets you grow aggressively where the economics support it, and pull back where they do not — rather than applying a uniform ceiling that caps every campaign equally.

What This Looks Like in Practice

One brand we worked with — a health supplements company — was running all campaigns at a 5x Target ROAS. Their Growth Roadmap review showed that 30% of their product catalogue had gross margins above 65%. We split the account by margin tier, set lower ROAS targets on the high-margin products, and increased spend on those campaigns.

Within four months, revenue increased by 38% while overall account profitability (measured by contribution margin) improved.

The ROAS number dropped. The business got healthier.

If your ROAS target is holding your growth back, that is exactly the kind of thing we look at in the Free Growth Roadmap session. No cost, no commitment — just a clear view of where the constraint is.