Why ROAS falls
- More competitors bidding on the same keywords.
- Campaigns drifting into broad, low-intent searches.
- Budget spread across SKUs that were never going to convert.
- Listings that convert worse than competitors’, so every click costs more per order.
- Seasonality mistaken for decline.
The numbers that matter
| Metric | Formula | Tells you |
|---|---|---|
| ROAS | Ad sales ÷ ad spend | Revenue per rupee of ads |
| ACoS | Ad spend ÷ ad sales | The same thing, as a percentage (1 ÷ ROAS) |
| TACoS | Ad spend ÷ total sales | How dependent the whole business is on ads |
| Break-even ROAS | 1 ÷ margin before ads | The minimum ROAS that doesn’t lose money |
Margin before ads means selling price minus product cost, marketplace fees, shipping, packaging and expected returns, as a percentage of selling price.
A profit-first restructure
- Calculate break-even ROAS per SKU. Margins differ by product, so targets should too.
- Split campaigns by goal. Profit campaigns must beat break-even; ranking or launch campaigns get a set budget and a time limit.
- Cut the tail. Pause keywords and SKUs that spend without converting.
- Fix the listing before raising bids. Better conversion lowers cost per order at the same bid.
- Watch TACoS monthly. Falling TACoS with steady sales means organic sales are growing.
From our work: [An ad restructure PURSHO ran: break-even ROAS by SKU, what we paused, and the result]
We use this framework in our eCommerce consulting engagements.
How PURSHO approaches this
See how we help with this in eCommerce Consulting, or book a free 30-minute consultation. Related case study: [Category] D2C brand.
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