Definition
Target ROAS is the ROAS you aim for to achieve a desired profit buffer after variable costs and fixed cost allocation.
Example
If contribution margin is 40% and you want a 10% profit buffer, target ROAS is about 1 / (0.40 - 0.10) = 3.33.
How to use it
- Compute from contribution margin and desired profit buffer.
- Set separate targets by channel or product when margins differ.
- Validate with incrementality if attribution is noisy.
Common mistakes
- Using one target ROAS across offers with different margins.
- Optimizing for ROAS and ignoring volume or payback constraints.
Why this matters
This term matters because it affects how you interpret performance and make budget decisions. If you use inconsistent definitions or windows, ROAS/CPA can look "better" while profit gets worse.
Practical checklist
- Write a 1-line definition for "Target ROAS" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Target ROAS Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Target ROAS: how to set a realistic ROAS goal) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Target ROAS Calculator: Estimate a target ROAS to cover variable costs plus a desired margin buffer.
- ROAS Calculator: Calculate Return on Ad Spend (ROAS) and estimate contribution profit after ad spend.
Guides
- Target ROAS: how to set a realistic ROAS goal: A practical guide to target ROAS: use contribution margin and allocations for fixed costs and profit to set a ROAS goal that fits your business.
- Paid ads measurement hub: ROAS, MER, marginal ROAS, and incrementality: A practical hub for paid ads measurement: connect ROAS to profit, use MER for top-down truth, watch marginal ROAS for scale, and validate incrementality with holdouts.