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Debunking ROAS Myths: When High Returns Can Actually Hurt Growth

DigiCom Contributor


Let’s talk about ROAS. We all know it's an important metric. It tells us how much revenue we generate for every dollar we spend on ads. 


And generally, you’d think higher ROAS is better, right?


Well, that’s not always the case.


See, while a sky-high ROAS might seem like a marketer's dream, it can sometimes hurt your growth as a business. 


How? Keep on reading to find out!


The Downsides of Over-Focusing on High ROAS


Tunnel vision: When we're obsessed with immediate returns, we might miss out on the bigger picture. We could be neglecting things like building brand awareness, finding new customers, and exploring exciting new markets.


Missed opportunities: Chasing the highest ROAS can lead you to focus on low-hanging fruit, existing customers, and highly converting campaigns. While this is safe, it limits your potential. You could be missing out on overlooked audiences and marketing strategies that could significantly expand your reach and revenue in the long run.


Hit a wall: If you keep squeezing every last drop of profit from your existing customers and campaigns, you will eventually hit a point of diminishing returns. You may have to spend more and more money to acquire each new customer, while your overall growth slows down.


Ignoring customer lifetime value: When you're focused on immediate ROAS, it's easy to forget about the long-term value of each customer. Someone who might not seem profitable at first could become a loyal customer who makes repeat purchases, refers their friends, and becomes a true brand advocate.


Example Of Stagnant Growth Due To ROAS


Let’s say you run a successful online baking supply store. Your initial Facebook ads campaign targeting beginner bakers was a hit with incredibly high ROAS. So, you poured more money into those ads, and they continued to perform well.


However, later on, you noticed something, your overall sales growth had plateaued. You were still making good money, but you weren't seeing the explosive growth you were hoping for.


The problem? You were so focused on optimizing for that high ROAS that you neglected to explore other avenues. You weren't investing in ads targeting experienced bakers or professional pastry chefs. You weren't experimenting with new product lines, like gourmet ingredients or high-end baking tools. You were essentially stuck selling the same starter kits to the same audience.


While your existing campaign was profitable, it wasn't driving the kind of long-term growth you needed to scale your business. When you prioritize immediate returns, you are inadvertently limiting your potential.


So, What Should You Do Instead?


Experiment with your campaigns: Set aside a slice of your budget for testing new ideas, even if they don’t promise the highest ROAS upfront. Think brand awareness efforts, teaming up with influencers, or trying out strategies to reel in fresh customers.


Think beyond the first sale: A customer’s initial purchase is just the start. Consider how much value they bring overtime to decide how much you should spend to win them over.


Keep an eye on more than ROAS: Sure, ROAS is important, but don’t forget other key metrics like CAC, lifetime value (CLTV), and even website traffic. Together, they give you the bigger picture.


Be open to trying new things: Don’t shy away from experimenting, even if there’s a chance it won’t work. Some of the best campaigns out there came from taking risks and learning along the way.


Ultimately, a balanced approach is key. While ROAS is an important metric, it shouldn't be the sole driver of your marketing decisions. As you focus on long-term growth, diversify your campaigns, and consider a wider range of KPIs, you can build a sustainable and successful business.


What are your thoughts? Have you ever experienced a situation where a high ROAS actually hindered growth?


SO, WHERE DO YOU FIND THIS PARTNER?


Well, aren’t we glad you asked! We at DigiCom are obsessive data-driven marketers pulling from multi-disciplinary strategies to unlock scale. We buy media across all platforms and placements and provide creative solutions alongside content creation, and conversion rate optimizations. We pride ourselves on your successes and will stop at nothing to help you grow.




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