Derive it from contribution margin and your fixed per-order costs, not from a benchmark. The formula everyone uses — 1 ÷ gross margin — is a breakeven floor, not a target, and it ignores the per-order costs that decide whether an order is actually worth having.

On this page

• What determines the right target ROAS for a store?
• How do I build my target ROAS from margin?
• Why is my target ROAS having no effect?
• Why is site conversion rate a misleading comparison?

What determines the right target ROAS for a store?

1. Breakeven is set by margin, and a discount moves it.

Breakeven efficiency = 1 ÷ contribution margin.

At 72% margin that is 1.39×. Run 20% off and margin drops to about 65%, so breakeven rises to about 1.54×. A breakeven bar derived at full price is too low during a promo — and that is exactly when people quote it, because that is when volume is high.

2. Fixed per-order costs land on the ticket, not the margin rate.

Shipping, packaging, payment fees and pick-pack are dollars per order, not a percentage. High margin on a small order still fails to fund acquisition.

Which means order size is usually the constraint, not discount depth. Two stores with identical margin percentages and different average order values need very different targets.

3. Know what a discount actually costs you.

• A percent-off costs d ÷ m of gross profit
• A free unit costs (1 − m) ÷ m
• A free gift costs (1 − m_gift) ÷ m

At 87.5% margin, a buy-one-get-one reads to the customer as 50% off and costs you 14.3%.

The trap: putting the perceived depth into the margin formula rather than the real cost makes solvent offers look insolvent. That error inverted an entire analysis before it was caught.

How do I build my target ROAS from margin?

1. Contribution margin per order, after cost of goods, fixed per-order costs, and expected returns.
2. Your required contribution after acquisition — the actual business decision.
3. Target = 1 ÷ (margin − required contribution), adjusted for any live promo.
4. Sanity check against your current blended figure. If your target is far below what you already achieve, it will be inert.

Why is my target ROAS having no effect?

A target only binds at or above the ad group's achieved total efficiency. A 2.5× target on an ad group running 6× does nothing at all. You have not set a control, you have set a decoration.

And on a total-value bidder, a target structurally rewards repeat-buyer traffic. Measured on a supplements brand running a natural A/B for 2.5 months: the campaign with a 2.75 floor cut new-customer share of revenue from 39.3% to 17.7% while producing zero new-customer improvement — $161 against $162 CAC.

If new customers are the goal, turn on the new-customer acquisition setting first. A floor alone steers the wrong way.

Why is site conversion rate a misleading comparison?

Site conversion rate is a mix statistic. It falls when you scale, rises during a sale, and spikes on email send days. Any before-and-after read across a promo boundary or a traffic-mix shift is garbage — and it is the most common way a media buyer gets blamed for something that is not theirs.

Related questions

If Google only matches about 60% of my offline conversions, is my real target ROAS higher than the number I set?

Yes. Your real requirement is your target divided by your match rate. Read the full answer.

How do I work out what percentage to put in a Google Ads seasonality adjustment?

From your own measured conversion-rate change in the equivalent past period, not from a guess — and only for short, predictable events. If you cannot point at a comparable historical window, do not set one. Read the full answer.

I added a target ROAS and the campaign stopped spending. Should I lower the target?

Whether to lower the target depends entirely on when the campaign stopped spending. A campaign that strangled within about 24 hours of the target being added and one that drifted into it over weeks look identical in the interface, and the fixes are opposite — lowering the target is the wrong move in one of them. Read the full answer.

Written by Usama Khan, who runs Google Ads for e-commerce brands and home-services companies at AdventurAds. Figures are from accounts under active management and are anonymised. Last reviewed 2026-08-26.