Marketing Spend
How much should I spend to grow?

$100 product
gross profit before advertising: $60
 

Senario1: Higher ROAS

 

ROAS: 5X

Ad Spend: $20

Revenue: $100

Remaning contribution: $40

 

Profitable, but potentially limiting. There may only be a limited number of people you can reach at this efficiency. You're targeting the easiest, cheapest customers.

 

Senario 2: Lower ROAS

 

ROAS: 2.5X

Ad spend: $40

Revenue: $100

Remaning contribution: $20

 

You're making less profit per order, but you're still making money. By accepting a lower ROAS, platforms like Meta and Google can:

- Bid in more auctions

- Reach colder audiences

- Spend much larger budgets

- Acquire customers who were previously "too expensive"

 

Instead of spending only $20/day, you might be able to spend $80/day because you've 

expanded the pool of customers you're willing to pay for. 

 

Target ROAS           Daily Ad spend               Daily Revenue

5X                                    $20                                $100

2.5X                                 $80                                $200

 

Even though efficiency is lower, 

you're generating far more total sales 

because you've moved the constraint 

on spending. 

 

Optimize for:

- Total profit

- Customer lifetime value (LTV)

- Market share 

- Revenue growth 

 

The last 20% of efficiency often 

limits 80% of scale. 

 

ROAS measures efficiency. 

Scale measures opportunity. 

 

The goal is to find the lowest ROAS 

that still produces acceptable profit - 

that's where you unlock the most 

scaleable growth. 
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