Marginal ROAS Calculator
Estimate diminishing returns and find the profit-maximizing ad spend from a simple response curve.
At low spend, ROAS can look great. As you scale, you usually hit diminishing returns: incremental conversions become more expensive and marginal ROAS falls.
This calculator models revenue as a power-law response curve and estimates the spend level that maximizes profit given your margin assumptions.
Prefer an explanation- Read the guide.
Marginal ROAS: how to scale ads with diminishing returnsPaid ads measurement hub: ROAS, MER, marginal ROAS, and incrementalityMER (blended ROAS): how to use it without fooling yourselfAttribution vs incrementality: what to trust, when, and how to test
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Use a consistent attribution model; treat as a proxy for response curve fitting.
$
%
Lower means stronger diminishing returns. 0.6 to 0.9 is a common range.
If you have an operational cap, set it here; 0 means no cap.
$
Tip: you can type commas (e.g., 10,000).
Example
Using the default inputs, the result is:
$103,680.00
- Current ad spend
- $50,000
- Current attributed revenue
- $200,000
- Contribution margin
- 40%
- Diminishing returns exponent (0 to 1)
- 0.75
- Max spend cap (optional)
- $0
How to calculate
- Enter current ad spend and revenue (or attributed revenue proxy).
- Enter contribution margin to convert revenue into gross profit.
- Set a diminishing returns exponent (0 to 1) and optionally a max spend cap.
- Review optimal spend, expected profit, and implied marginal ROAS.
Formula
Assume revenue = k * spend^b (0<b<1). Profit = margin*revenue - spend. Optimal spend occurs when marginal profit ~ 0.
- Uses a simple power-law response curve; real curves vary by channel and saturation.
- Current spend/revenue anchor the curve (k).
- Ignores fixed costs and long-term LTV effects (use incrementality and LTV when possible).
Benchmarks
- If marginal profit per $1 at the optimum is near 0, you are near the spend ceiling for your current economics.
- If optimal spend is far above current spend, validate incrementality before scaling (attribution may overstate).
- Curves differ by channel, audience, and creative; fit and optimize per segment when possible.
FAQ
What exponent should I use-
If you don't know, start with 0.7-0.85 and scenario test. Lower means stronger diminishing returns. The right value varies by channel, creative freshness, audience size, and tracking.
How is marginal ROAS different from average ROAS-
Average ROAS is total revenue / total spend. Marginal ROAS is incremental revenue from an extra $1 of spend. Scaling decisions should use marginal ROAS (or incremental profit), not average ROAS.
Common mistakes
- Using platform-attributed revenue when incrementality is low (overstates the curve).
- Assuming the same curve across channels and audiences (segment curves differ).
- Ignoring capacity constraints (inventory, sales capacity, fulfillment).
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Quick checks
- Keep attribution model and window consistent when comparing campaigns.
- Pair efficiency metrics (ROAS/CPA) with profit assumptions (margin, refunds, fees).
- Validate tracking after site changes (pixels/events can silently break).