ROAS (Return on Ad Spend) is simple and shiny. But when it’s the only number in focus, it can mask weak margins, inefficient spend, and missed growth opportunities.
At worst? It’s a vanity metric. At best? It’s one part of a much bigger picture.
Here’s why e-commerce brands, especially those looking to scale, need to go beyond ROAS and start tracking the metrics that actually impact commercial performance.
ROAS: A Useful Tool, Not a North Star
ROAS measures revenue against ad spend. And while it’s helpful for comparing campaigns or spotting trends, it says nothing about profit, customer value, or sustainable growth.
Let’s say you’re holding ROAS at 800% by only bidding on brand terms or remarketing audiences. Great. But are you actually acquiring new customers? Are you growing revenue profitably? Are you gaining market share?
If those questions aren’t being answered, ROAS is just a distraction.
Here’s what to track instead — and why these seven metrics give a much clearer view of performance.
1. LTV:CAC Ratio
= Customer Lifetime Value ÷ Customer Acquisition Cost
This ratio tells you whether your customer acquisition is actually profitable over time. It answers: “For every pound I spend to acquire a customer, how much do I make in return — not just today, but over their entire relationship with the brand?”
An LTV:CAC ratio of 3:1 is typically a healthy benchmark, but this varies by industry and business model. What matters more is tracking it consistently, especially if you're investing in channels with longer payback periods.
Pro tip
If your LTV:CAC ratio is shrinking, don’t just blame rising CPAs. Look at repeat rate, retention strategy, and post-purchase experience too.
2. Contribution Margin
= Revenue – variable costs (COGS, shipping, ad spend, etc.)
Think of contribution margin as the money left over from each sale that contributes to your fixed costs and profit. It’s a more comprehensive view than gross profit because it includes the cost of acquiring that sale.
For e-commerce businesses running ads, this is key. A campaign might be generating revenue — even hitting your ROAS target — but if it’s eating into your margins due to high shipping or discounts, the contribution margin will reveal it.
A healthy contribution margin means you’re not just selling, you’re selling profitably.
3. Blended (New) CAC
= Total marketing & sales spend ÷ total (new) customers acquired
This is your all-in cost to acquire a new customer, across every channel — not just paid search or social.
It helps answer a critical question: How efficiently are we growing our customer base?
Tracking blended CAC is important because it accounts for how your channels work together. You might see Google Ads driving the final click, but Meta or TikTok doing the heavy lifting at the awareness stage.
Tracking this monthly can uncover hidden inefficiencies, or highlight where you can afford to spend more to scale.
4. POAS (Profit on Ad Spend)
= Gross profit ÷ ad spend
POAS is ROAS with one major improvement: it factors in profitability. Instead of measuring just revenue, you’re looking at what really matters, the money left after the product cost.
This is especially powerful if you sell products with widely varying margins. A campaign generating £10,000 in revenue might look strong on ROAS, but if it’s mostly low-margin products, your profit could be slim.
POAS helps you optimise campaigns toward actual returns, not just top-line numbers.
5. MER (Marketing Efficiency Ratio)
= Total revenue ÷ total marketing spend
MER is a simple but powerful metric that gives you the macro view. It shows how efficiently your entire marketing machine is working, across all channels.
It’s useful for leadership and finance teams who want to understand how much revenue the business is generating per £1 of marketing investment.
Use MER alongside CAC to track overall marketing health — especially during high-spend periods like Q4.
6. Gross Profit
= Revenue – Cost of Goods Sold (COGS)
This one’s basic, but often overlooked in marketing discussions.
You need to know how much money your products actually generate before ad spend. If you’re not clear on your gross profit margins, it's almost impossible to set effective bidding targets or scale smartly.
Think of gross profit as your fuel. Everything else, ad spend, ops, salaries - comes from this tank.
7. Customer Lifetime Value (LTV)
= Average Order Value x average repeat purchases
LTV helps you shift focus from the first sale to the customer journey. Brands with a strong repeat purchase rate can afford to spend more on acquisition — and outbid competitors who are only focused on single-order ROAS.
Expressing LTV in gross profit terms gives a much clearer view of long-term profitability.
The higher your LTV, the more aggressive you can be with customer acquisition - without sacrificing margin.
In Summary
ROAS has its place, it’s useful for diagnosing performance at the campaign level and comparing results across channels. But it’s just one piece of a much bigger puzzle.
If you want to grow an e-commerce brand profitably and sustainably, your strategy needs to be anchored in commercial metrics, not just surface-level performance indicators.
