The ROAS Trap
"We target 4x ROAS."
It's the most common answer we hear when asking about campaign goals. It's also usually the wrong target.
ROAS tells you about revenue efficiency. It says nothing about profit.
Why ROAS Misleads
Consider two scenarios at 4x ROAS:
Scenario A: £10,000 spend → £40,000 revenue → £8,000 gross profit (20% margin) → Net: -£2,000
Scenario B: £10,000 spend → £40,000 revenue → £16,000 gross profit (40% margin) → Net: +£6,000
Same ROAS. Completely different outcomes. One loses money. One generates healthy profit.
This is why we've moved every client away from ROAS-primary targeting. Read the full breakdown.
Setting Meaningful 2026 Targets
Start With Contribution Margin
Calculate your true cost per order:
- Product cost
- Fulfilment and shipping
- Payment processing
- Returns allowance
What's left is your contribution margin. This is your maximum allowable CPA before you lose money.
Build in Your Profit Requirement
If contribution margin is £30 and you need 20% net profit on revenue, your target CPA isn't £30—it's more like £22-24.
Account for Customer Lifetime Value
For brands with genuine repeat purchase patterns, you can afford higher acquisition costs. But be honest: subscription models often disappoint in paid search.
The 2026 Target Framework
We recommend this hierarchy:
- Primary: Contribution Profit - Total revenue minus COGS minus ad spend
- Secondary: Target CPA - Based on contribution margin minus profit requirement
- Tertiary: ROAS - As a sanity check, not a goal
Channel-Specific Considerations
Performance Max: Target ROAS bidding works, but set targets based on your contribution analysis, not arbitrary round numbers.
Google Shopping: Segment by product margin. A 4x ROAS target across mixed-margin products guarantees you're losing money on some.
Google CSS: Factor the margin improvement into your targets. You can afford slightly lower ROAS because your net position improves.
What "Good" Looks Like
From our portfolio analysis:
- Fashion/Apparel: Contribution profit 12-18% of revenue post-ad-spend
- Home & Living: Contribution profit 15-22% of revenue post-ad-spend
- Health/Supplements: Contribution profit 20-30% of revenue post-ad-spend (higher margins)
These aren't aspirational. They're achievable with proper account structure and spend governance.
The Conversation You Need to Have
Sit down with your finance team before 2026 planning:
- What's our blended product margin?
- What net profit percentage do we need from paid channels?
- What's our realistic CAC ceiling?
Only then set Google Ads targets.
Need help translating business goals into campaign targets? Our audit process includes full margin and profitability analysis.