If you are getting a 9 ROAS on your ad spend, you are doing it wrong.

Let's use an example:

1. if you are spending $100 and generate $900 in sales, that's a 9 ROAS
2. if you spend $200 and generate $1,500 in sales that's a 7.5 ROAS
3. if you spend $500 and generate $2,500 in sales that's a 5 ROAS
4. If you spend $1,000 and generate $4,000 in sales that's a 4 ROAS
5. And if you spend $2,000 and generate $6,000 in sales, that's a 3 ROAS

In each case, as we spent more money on ads, our ROAS dropped.

That’s bad, right?

Nope.

Let's use 40% as our cost of goods sold (COGS).

Our gross profit after ad spend and COGS in each scenario above is:

1. $900 in sales = $440 gross profit
2. $1,500 in sales = $700 gross profit
3. $2,500 in sales = $1000 gross profit
4. $4,000 in sales = $1400 gross profit
5. $6,000 in sales = $1600 gross profit

ROAS is a valuable metric in retail management, but it's essential to understand its limitations. As you increase your ad spend, it's common to see a decrease in ROAS. This is because the more you spend, the harder it becomes to maintain the same level of efficiency in reaching potential customers.

While ROAS is an important metric, it shouldn't be the sole focus. The ultimate goal for any business is to maximize profit. In this example, even though the ROAS decreased with increased ad spend, the gross profit also increased (but eventually it will taper out.)

As a merchant, your objective is to maximize sales and profits, not JUST ROAS.