Why “Good” ROAS Depends on Growth Stage
If you oversee a paid media team for an eCommerce brand or direct-to-consumer retailer, you’ve probably been asked these questions many times:
“What should our ROAS be?”
“Is 2.5x good?”
“Why did ROAS drop when we increased spend?”
Whatever it is, the way you tell your story online can make all the difference.
ROAS Is Useful, But It’s Not the Whole Story
ROAS (Return on Ad Spend) measures how much revenue you earn for every dollar spent. It’s helpful, directional, and familiar to CFOs. However, treating ROAS like a pass/fail grade is where brands often get stuck.
In truth, ROAS is not absolute; it is contextual. It changes with brand maturity, attribution, channel mix, competitive landscape, and strategy objectives.
A brand focused on profitability and efficiency will optimize for a different ROAS than a brand focused on market share and growth velocity. Lower funnel campaigns will always outperform mid to upper-funnel initiatives. That doesn’t mean one is “good” and the other is “bad”. It simply means they serve different purposes.
Let’s break down how ROAS evolves across growth stages, why channel mix changes performance expectations, and how to align your ROAS goals to business outcomes.
1. Early-Stage Growth ROAS Will Be Lower and That’s Normal
When you’re early in your growth curve, marketing is expensive, Customer Acquisition Cost (CAC) is high, and trust is low. Building brand awareness and trust among new customers for a new product, brand or category takes time.
In the zero-to-traction phase:
Most people aren’t ready to buy
You’re testing Creative Positioning
Landing pages, offer positioning, and onboarding flows are evolving
Prospective customers don’t know your brand
This phase is about learning, not maximizing return.
If you’re launching, testing channels, or entering a new market: expect lower ROAS and consider it an investment. It’s the price of figuring out who converts, how, and why. This insight can also help you refine your target markets and brand messaging.
If your brand is early-stage and ROAS appears low, ask:
✔ Are we learning what resonates with our customers?
✔ Are we improving click-through and conversion rates?
✔ Is cost per acquisition trending down?
If the answer is yes, that’s a win, even if ROAS isn’t hitting your goals.
2. Mid-stage Growth Brands Experience Improving ROAS with Brand Recognition
As awareness builds, people convert faster because prospective customers have heard of your brand now and may be ready to explore your product offering and brand promise.
When you consistently show up in front of the right audience:
Click-through-rate “CTR” goes up
Conversion rates increase
Customer Acquisition Cost “CAC” falls
Paid efficiency improves
This is where many brands first see ROAS shift from being barely breakeven to profitable.
If you’re mid-stage with momentum, this is your time to:
✔Scale your highest performance channels
✔Refine audience segmentation
✔ Introduce retention + lifetime value “LTV” tactics
✔Test new channels or creative formats
At this stage, you have lots of room to grow and will benefit from a phased expansion & optimization strategy.
3. Later-Stage Growth Brands Achieve Scale with Upper-Funnel Marketing which Lowers ROAS
Influencer partnerships, TikTok awareness campaigns, PR placements, display ads, OTT streaming advertising, and creator content rarely convert audiences directly. This is scary for marketing and leadership teams that are solely focused only on ROAS. However, brands cannot scale forever on high-ROAS, bottom-funnel marketing alone. Eventually you’ll saturate your existing audience and growth will stall.
Upper-funnel investment reduces ROAS but expands revenue by:
Reaching new audiences
Increasing branded search lift
Filling retargeting pools
Creating momentum for scaling spend
Increasing brand recognition
Brands that simply chase efficiency often hit a growth threshold. Brands that balance efficiency and customer reach will win the long game.
If you’re a maturing brand entering this phase, this is the time to:
✔ Introduce and scale upper-funnel channels with clear objectives
✔ Define distinct roles for awareness, consideration, and conversion media
✔ Align leadership on short-term ROAS trade-offs for long-term growth
✔ Invest in creative formats designed for reach and storytelling
At this stage, growth depends on balancing efficiency with audience expansion and executing a structured upper-funnel strategy that supports future scale.
4. Mature Brands Redefine “Good” ROAS Around Incrementality and Profitability
As brands mature, ROAS no longer improves simply through increased recognition or scale. Most prospective customers already know the brand, competition is higher, and paid channels are more saturated. At this stage, ROAS reflects not just efficiency, but how incremental and profitable your media investments truly are.
When brands reach maturity, several dynamics emerge:
Click-through rates stabilize rather than grow
Conversion rates plateau
Customer Acquisition Cost increases due to competition
Paid media captures more existing demand than creates new demand
This is where ROAS often appears to flatten, even when revenue remains strong.
For mature brands, success depends on shifting focus from raw ROAS to incremental impact and margin contribution.
If you’re operating at this stage, your priorities should include:
✔ Evaluating incremental lift versus attributed revenue
✔ Balancing new customer acquisition with retention investment
✔ Protecting contribution margin while sustaining demand
✔ Refining channel roles to reduce cannibalization
✔ Advancing multichannel attribution to understand true performance
At this stage, growth is driven less by aggressive expansion and more by intentional optimization across the full marketing system.
In Summary, A Brand’s Phase of Growth Determines What “Good” Looks Like
ROAS benchmarks should shift depending on your growth stage & business objectives:
Launch & Learning
Low ROAS acceptable → prioritize data, testing, CAC reductionGrowth Expansion
Improving ROAS → expand channels, improve LTV, scale spendGrowth Acceleration
Combination of high & low ROAS expected → scale acquisition, add upper-funnel channels, strengthen brand recognitionMature Brand
Lower overall but stable ROAS → profitability, incrementality, and retention
As a reminder, instead of asking: “Is our ROAS good?”
Ask: “Is our ROAS appropriate for our stage, channel, and goal?”
If your only metric of success is ROAS, you may be designing a strategy that prevents future scale.
The Next Time You Review ROAS, Ask Yourself:
Are we expecting scale while optimizing for efficiency?
What can we learn from a low ROAS? What can we adjust?
Is our ROAS target holding growth back?
Does leadership understand the tradeoff between profit today vs. revenue tomorrow?
Remember, ROAS is a helpful guide, not the absolute scorecard for success.
If You’re Balancing Growth & Efficiency, Implement a Framework for ROAS Success
If you’re navigating scaling decisions, attribution challenges, or a plateau in marketing performance, Froghop Digital can guide you to overcome barriers and ensure you are aligned with the right ROAS objectives.
We diagnose where growth is stuck, identify early wins, clarify attribution, and build a roadmap that moves brands from fragmented tactics to a scalable revenue engine.
If you want clarity on your ROAS goals and how they should change as you grow, let’s talk.