An agency that opens a conversation by asking for your ROAS target is asking the wrong question, and one that guarantees a specific result should be avoided. The consensus among experienced operators is that a single, generic ROAS target is a deeply flawed and even dangerous way to manage your ad spend. It ignores your actual profitability, the nuances of your product catalog, and the fundamental goal of acquiring customers sustainably. As the host of The Bottom Line: Ecommerce Tactics for Profitable Growth puts it, blindly copying someone else’s ROAS target is a terrible mistake that can kill your business.
A much smarter approach, as Constantine Yurevich explained in detail on the DTC Podcast, is to shift your focus from average ROAS to marginal ROAS. Average ROAS simply blends all your results together, masking inefficiency. Your average might look healthy, but your last dollar spent could be losing you money. Marginal ROAS, on the other hand, measures the return on your very last dollar of ad spend. This is the true indicator of whether you should increase your budget. This framework forces you to stop spending at the point of diminishing returns, ensuring that every incremental dollar you invest is actually profitable.
So how do you determine your target? You don't pick it out of thin air. The correct way is to build it from the ground up, starting with your unit economics. On another episode of the DTC Podcast, the hosts made it clear that generic ROAS targets fail because they ignore the different profit margins across your product line. For each product, you need to know your Contribution Margin: the profit you make per unit before accounting for ad spend. This number tells you your break-even point and, therefore, the absolute maximum you can afford to spend to acquire a customer. Your true target ROAS is derived directly from this data, not from an industry benchmark or an agency's promise.
This product-level understanding allows you to run a sophisticated, balanced portfolio of campaigns. It’s not about hitting one ROAS number everywhere. As discussed on another DTC Podcast episode, you might have campaigns for branded search terms that deliver a very high ROAS, while simultaneously running top-of-funnel campaigns for new customer acquisition that have a much lower ROAS. A brand might even choose to be unprofitable on the first order for these acquisition campaigns, knowing that their LTV and payback window make it a worthwhile investment. The key is that this is a deliberate strategy, not an accident, and the blended result across the portfolio is profitable and drives sustainable growth.
A good agency partner will bring this level of nuance. In fact, as Michael Shaffa pointed out on the Serious Sellers Podcast, sometimes the right move is to spend less on advertising, not more. If your conversion rate or revenue-per-click is lagging behind your competitors, the problem is not your ad budget; it's your offer, your pricing, or your landing page. He argues for going back to the drawing board and reinvesting that ad money into improving the product or the offer itself. An agency focused on your actual business health will identify these fundamental issues, rather than just promising to hit an arbitrary ROAS targets while you burn cash.
Ultimately, ROAS is just one metric. Speakers across multiple shows, like eCommerce Fastlane, emphasize that lasting success comes from a comprehensive strategy. This means integrating your ad performance with robust financial tracking, sophisticated email marketing to increase LTV, and strong SEO for long-term organic traffic. Your agency should be a partner in growing your overall business, and that conversation is about a lot more than just ROAS.