What Is ROAS and How Do You Actually Improve It?

What is ROAS? How to calculate return on ad spend, what a good ROAS looks like for UK businesses, and the changes that genuinely improve it.

ROAS stands for return on ad spend: the revenue your advertising brings back for every pound it spends. You calculate it by dividing ad revenue by ad cost, so £4,000 of sales from £1,000 of ads is a ROAS of 4. Improving it comes down to tighter targeting, better landing pages, stronger ads and honest tracking.

ROAS is the number everyone nods at in marketing reports. It sounds technical, it arrives with a decimal point, and nodding feels safer than asking. But this one number tells you whether your advertising is making money or quietly losing it, so it deserves five proper minutes. We promise maths with a plot twist.

What does ROAS actually mean and how do you calculate it?

The short answer: ROAS is revenue from ads divided by the cost of those ads. Spend £1,000, make £4,000 in tracked sales, and your ROAS is 4, sometimes written 4:1 or 400 per cent.

That is the whole formula. No secret handshake. If you want the pocket definition for meetings, our plain English dictionary has one at https://www.mydigitalhero.co.uk/jargon-buster

The catch is not the calculation. The catch is what the number hides. ROAS measures revenue, not profit, and that difference has ruined more marketing budgets than any algorithm ever has.

What is a good ROAS?

The short answer: it depends entirely on your margins. Ecommerce businesses often treat around 4:1 as a healthy starting point, and lead generation campaigns are often judged against rougher benchmarks nearer 2:1, but neither number means anything until you know what a sale actually earns you.

Here is the bit most reports skip. Suppose your costs eat 70 per cent of every pound of revenue, leaving a 30 per cent margin. Now watch what the same innocent looking ROAS figures really mean on £1,000 of ad spend.

We find this table genuinely thrilling, and we accept that this is a niche form of fun. The same campaign can be a triumph or a slow leak depending on one number nobody put in the ad report. Know your margin before you judge your ROAS.

What can ROAS not tell you?

The short answer: quite a lot. ROAS cannot see your margins, it cannot tell a new customer from a returning one, and it only counts what your tracking actually catches.

A sale to a brand new customer who will reorder for years is worth far more than the same sale to someone who was going to buy anyway, yet ROAS scores them identically. And attribution, the business of deciding which click deserves credit for a sale, is messier than any dashboard admits. Someone sees your ad on Tuesday, asks their partner on Thursday, and searches your name on Sunday. Which touch gets the credit?

We find attribution one of the most fascinating puzzles in all of marketing, a genuine detective story hiding inside a spreadsheet, and the honest answer is that every model is a best guess. Treat ROAS as a strong signal, not a verdict.

The ROAS story that keeps marketing managers up at night

Picture a made up company. Call them Hypothetical Widgets Ltd. They spend £5,000 a month on ads with a ROAS of 1.2, and the marketing manager is happy, because revenue is up and the chart in the monthly meeting slopes pleasingly to the right.

Run the numbers from the table above. £6,000 of revenue, around £1,800 of it gross profit on a 30 per cent margin, and £5,000 of ad spend to get it. Hypothetical Widgets is paying £3,200 a month for the privilege of looking successful. Revenue went up despite the ads, not because of them.

Nobody in this story is a fool. The report simply answered a different question from the one everyone thought they were asking. That is why we are fussy about what goes in ours.

How do you actually improve ROAS?

The short answer: raise the value of each click or lower the cost of it. In practice that means proper tracking, tighter targeting, landing pages built to convert, ad copy that earns its place, and ruthless pruning of wasted spend.

The levers that push ROAS up:

Fix the tracking first. You cannot improve what you measure wrongly, and a surprising number of accounts measure wrongly.

Tighten the targeting. Negative keywords and the search terms report stop you paying for clicks that could never buy. Monday's post on Google Ads mistakes covers this in detail.

Improve the page after the click. The ad gets the visitor, the landing page gets the customer. This is conversion rate optimisation, and it is often the cheapest ROAS gain available. Our CRO service lives at https://www.mydigitalhero.co.uk/cro

Make the ads earn their spot. Test two messages, keep the winner, repeat for ever.

And the levers that drag ROAS down: broad match left unsupervised, slow pages, sending paid traffic to the homepage, and the classic of judging everything on one month of data. Order matters here. Fix measurement before targeting, targeting before pages, pages before creative. Improving an ad that points at a broken page is polishing the doorbell on a house with no floor.

Cheaper clicks help too, and they can move a long way. For Northumbria Cars we cut the cost per click by 98 per cent. When clicks cost pennies instead of pounds, the same budget buys far more chances to win a customer, and ROAS climbs with it.

How does MDH report on ROAS for Hero+ clients?

The short answer: in plain English, next to the numbers that give it meaning, which are cost per lead, margin and actual return. A big ROAS on its own earns no applause here.

Paid ads at MDH are run by Jared, who watches client accounts daily and is disturbingly enthusiastic about auction data. Reporting that hides behind vanity numbers is one of his pet peeves, so our reports say what was spent, what came back, and what we are changing next.

It all comes under one Hero+ subscription alongside SEO, content and design, with ad spend billed separately and paid by you, directly to the platform. The plans are at https://www.mydigitalhero.co.uk/hero and the paid ads detail is at https://www.mydigitalhero.co.uk/google-ads

If your reports show a ROAS and you have never been told what it means for profit, that is worth a conversation.

We will look at your numbers honestly and tell you what they say, free, at https://www.mydigitalhero.co.uk/contact

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