Target ROAS
Target ROAS is the ROAS floor below which a campaign destroys margin. Derived from product gross margin and a contribution-to-fixed-cost reserve; the mathematical inverse of Target ACOS.
Target ROAS is the minimum ROAS a campaign must achieve to be profit-positive at the unit-economics level. It is the inverse of Target ACOS:
Target ROAS = 1 / Target ACOS
A product with 35% gross margin (excluding ad cost) that targets a 5% contribution-to-fixed-cost reserve has Target ACOS = 30% and Target ROAS = 3.33×. The Target ROAS is the floor below which the campaign destroys margin.
Deriving Target ROAS from margin
The same logic as Target ACOS, expressed as a multiple:
Target ROAS = 1 / (Gross Margin % – Contribution Reserve %)
Worked example:
- ASP: €40
- Variable COGS (product + FBA + referral + return reserve): €26
- Gross margin (pre-ad): €14 (35%)
- Contribution reserve target: 5% of ASP = €2
- ACOS ceiling: (€14 – €2) / €40 = 30%
- Target ROAS = 1 / 0.30 = 3.33×
A campaign on this SKU must clear 3.33× ROAS to add to bottom-line contribution.
Target ROAS by campaign role
Just as Target ACOS varies by campaign role (branded tighter than generic, generic tighter than competitor), Target ROAS does too — in the same direction, expressed as multiples instead of percentages:
| Campaign role | Target ACOS | Target ROAS |
|---|---|---|
| Branded defence | 10–15% | 6.7× – 10× |
| Harvested exact (profit) | 18–22% | 4.5× – 5.5× |
| Generic exact (acquisition) | 22–28% | 3.6× – 4.5× |
| Auto / broad (discovery) | 30–40% | 2.5× – 3.3× |
| Competitor conquest | 35–50% | 2.0× – 2.9× |
A single Target ROAS across the account either over-restricts branded or under-restricts conquest.
Target ROAS in bid math
The bid formula in ROAS form:
Max CPC = ASP × CVR / Target ROAS
Same SKU as above, on an exact-match keyword with 8% CVR:
Max CPC = €40 × 0.08 / 3.33 = €0.96
Identical answer to the ACOS form (€40 × 0.08 × 0.30 = €0.96), via a different intuition.
Common mistakes
- A single Target ROAS for the whole account. Each campaign role has different economics.
- Setting Target ROAS by industry benchmark instead of by your own margin. "ROAS should be 4×" is empty without naming the margin profile that produces 4× as the floor.
- Forgetting to update Target ROAS when margin shifts. FBA fee changes, COGS changes, and price changes all move the target.
- Confusing Target ROAS with achieved ROAS. Target is the floor; achieved is the result. A campaign at 4× ROAS against a 3× target has 33% margin headroom; the same 4× against a 5× target is destroying margin.