The Hidden Costs of ROAS Obsession: What eCommerce Brands Lose Chasing the Wrong KPI

You know that feeling when your Google Ads dashboard is showing beautiful ROAS numbers, but your accountant keeps asking why the bank balance isn't matching the "success" story? Welcome to the most expensive delusion in eCommerce: ROAS obsession.

While marketing teams are high-fiving over 4x, 5x, even 6x ROAS figures, finance departments are pulling their hair out trying to work out where all the actual profit has gone. Spoiler alert: it's being eaten alive by hidden costs that ROAS conveniently ignores.

The ROAS Mirage: Why Revenue Isn't Profit

ROAS (Return on Ad Spend) measures one thing and one thing only: revenue generated per pound spent on advertising. It's the equivalent of judging a restaurant's success purely by how many customers walk through the door, completely ignoring whether they're actually making money on each meal served.

Here's the uncomfortable truth: those "hidden" post-sale costs can act like an 8-15% tax on every single sale you make. That means your celebrated 4x ROAS might actually be closer to a 3.4x when you factor in the real cost of doing business.

The Post-Sale Cost Breakdown: Where Your Profit Goes to Die

Affiliate Commissions and Partnership Fees

Let's start with the big one. Affiliate commissions typically range from 5-20% of each sale, effectively acting as post-sale discounts that ROAS calculations completely ignore.

Picture this: you've got a £100 order with a 10% affiliate commission. ROAS treats it as the full £100, but you're actually only netting £90. That's a 10% hit to your margins that your ROAS figure doesn't even acknowledge exists.

Then there are agency rebates and platform kickbacks. Some agencies have been known to optimise for their own benefit rather than client profitability, pocketing rebates while celebrating ROAS figures that look impressive on paper but deliver questionable real-world results.

Customer Service and Support Costs

Every order creates potential customer service interactions. Industry data suggests customer service expenses add £3-£5 per support ticket, with roughly one in ten orders triggering support interactions. That's an average overhead of £0.50 per order that your ROAS calculations blissfully ignore.

When you're chasing high ROAS by targeting price-sensitive customers or promoting products with complex setup requirements, these support costs can balloon quickly.

Warehousing and Operational Overhead

Warehousing and storage inefficiencies can consume up to 20% of product costs. Returns processing, quality control checks, inventory management systems, and the physical space to store everything all cost money.

These operational costs scale directly with volume but remain completely invisible in ROAS calculations. So while your marketing team celebrates driving more orders, your operations team is working overtime to fulfil orders that barely cover their true cost.

How ROAS Obsession Actually Damages Your Business

The Operational Strain Effect

When marketing teams drive "successful" campaigns based solely on ROAS, they often create operational chaos. Warehouse staff work overtime, suppliers rush additional stock, and the entire supply chain operates in panic mode to support revenue that provides minimal profit contribution.

It's like revving your car engine in neutral - lots of noise and activity, but you're not actually going anywhere profitable.

The Margin Compression Trap

ROAS obsession encourages behaviours that systematically destroy margins:

• Running constant flash sales to boost conversion rates

• Promoting low-margin products because they're easier to sell

• Focusing exclusively on bottom-funnel customers who buy quickly but never return

• Bidding aggressively on branded terms to inflate attribution

While these tactics generate impressive return ratios, they turn your business into a volume game where you're constantly chasing your tail.

The Attribution Nightmare: What You Can't Measure, You Can't Manage

Post-iOS 14, attribution has become even more critical for understanding what's actually driving profitable growth. When pixels don't fire properly, algorithms suffer and show ads to random audiences rather than high-intent shoppers.

This leads to what we call "phantom ROAS" - campaigns that appear successful based on incomplete data but are actually burning through budget on low-quality traffic.

The Testing Trap

Many brands conduct superficial A/B tests that change headlines or button colours without addressing fundamental messaging problems. This approach fails to identify the deeper variations needed for meaningful improvement, leading to continued investment in fundamentally flawed strategies.

When you're optimising for ROAS, you might be optimising for the wrong thing entirely.

The Long-Term Damage: Why ROAS Kills Customer Lifetime Value

ROAS measurement encourages short-term thinking that damages long-term customer relationships. Here's how:

Poor Post-Purchase Experience

When you're focused on getting that initial conversion for ROAS calculation, post-purchase optimisation often gets neglected. Weak email strategies, poor cross-selling, and inadequate customer onboarding mean first-time buyers rarely become repeat customers.

Brand Building Neglect

ROAS fails to capture the value of brand-building activities that don't generate immediate conversions. This leads to systematic underinvestment in upper-funnel campaigns that build long-term competitive advantages and reduce future acquisition costs.

You end up in an expensive acquisition cycle where you're constantly chasing new customers rather than maximising value from existing ones.

The Economic Reality Check

With UK advertising investment growing 10.4% in 2024 to £42.6 billion, but growth expected to slow to 6.3% in 2025 due to economic headwinds, there's less margin for error than ever before.

Rising advertising costs, tightening consumer spending, and increased operational expenses make actual profitability - not vanity metrics - the determining factor for business survival.

The Better Way: Profit on Ad Spend (POAS)

The solution isn't to abandon measurement altogether - it's to measure what actually matters. Enter POAS (Profit on Ad Spend), which accounts for all post-sale costs and provides a true picture of campaign profitability.

How to Calculate True POAS

This approach requires more work upfront, but it prevents the expensive mistakes that ROAS obsession creates.

Implementation Strategy

Start by tracking these hidden costs for a representative sample of orders. You don't need perfect attribution immediately - even rough estimates will give you a more accurate picture than pure ROAS.

Progressive brands are beginning to attribute warehousing, customer service, returns processing, and other operational costs to individual orders or product categories. This granular approach reveals the true profitability of different customer segments and campaign strategies.

Making the Switch: Questions to Ask Yourself

Before your next campaign review, ask these profit-focused questions:

• What's the true profit margin on our best-performing products?

• Which customer segments have the highest lifetime value after accounting for acquisition costs?

• Are we losing money on certain campaign types despite good ROAS?

• What operational costs scale directly with our advertising volume?

The Bottom Line

ROAS obsession has created systematic blindness to the real costs of customer acquisition. While marketing teams celebrate impressive ratios, businesses haemorrhage profit through hidden expenses that can consume up to 15% of revenue.

The path to sustainable growth requires abandoning revenue-focused vanity metrics in favour of profit-centric approaches that account for the full cost of customer acquisition and lifetime value optimisation.

Your accountant will thank you. Your cash flow will thank you. And your business will actually be profitable, not just busy.

Time to put down the ROAS calculator and pick up a profit one instead.