Here’s a situation I see all the time. A store’s ads look great. ROAS is up, revenue is up, everybody’s happy. Then the accountant looks at the month and the business made less money than it did before.
How? Because the campaigns scaled the wrong products.
Why the best-looking campaigns can lose money
ROAS only knows revenue. It doesn’t know that:
- Some products have thin margins. A $100 product that costs you $80 to make and ship is not the same as a $100 product that costs you $30.
- Some products get returned a lot. Apparel, especially. A sale that comes back is not a sale.
- Discounts eat margin. A campaign that only works with a 30% off code might be driving revenue at a loss.
- Bestsellers aren’t always best earners. The product that sells the most is often the one you discount the most.
So the algorithm, doing exactly what you asked, pushes the products that are easiest to sell. Those are often the ones that make you the least.
The fix is judging on POAS, profit on ad spend, instead of ROAS. I explain the concept, and how to send profit back to the platforms, in Platform ROAS isn’t revenue. This post is about doing it product by product.
Find the products that actually pay for growth
- Get your margin per product. Price minus cost of goods, shipping, payment fees, and average return rate. A spreadsheet is fine to start.
- Look at what your ads are actually selling. Which products get the most ad-driven orders? Which ones get the most spend?
- Compare the two lists. You’ll usually find a handful of high-margin products getting very little spend, and some low-margin products getting a lot.
- Find your profitable ROAS for each product. A product with a 70% margin can be profitable at a much lower ROAS than one with a 20% margin. One target for the whole store doesn’t make sense.
How to scale on margin
- Split campaigns by margin tier. Give high-margin products their own campaigns and budgets, with their own targets.
- Send profit, not revenue, to the platforms when you can. If the purchase value you send is margin instead of order total, the algorithm will learn to chase profit. On Google, you can also add cost of goods to your Merchant Center feed so profit shows up in reporting.
- Make sure the purchase event is clean first. If it fires twice or with the wrong value, you’re sending bad profit numbers. Run the ten-minute pixel check before you change anything.
- Watch new customers separately. A customer who comes back and buys again is worth more than the first order shows. Know what a new customer is worth to you over time.
- Judge it on contribution margin. Total margin minus total ad spend, week over week. That’s the number that tells you if you’re growing.
Where Apello fits
Apello knows your margins and judges campaigns on them. It finds the products that actually pay for growth, shifts spend toward them, and tells you when a campaign that looks great is quietly losing money.