What is marginal ROAS (mROAS)?
How is marginal ROAS different from ROAS?
ROAS is an average. It divides all the revenue credited to a channel by all its spend. It looks back.
Marginal ROAS looks forward. It asks what the next slice of spend would add. Channels saturate: at some point an extra euro brings in less revenue than it costs, even while the average still looks healthy1.
Break-even is a margin question. Break-even ROAS is 1 divided by margin. In our convention, that margin is contribution margin before marketing.
How do you estimate it?
You cannot read it off a platform report. It is read from a response curve: how results change as spend changes2. Marketing-mix modelling is one way to estimate that curve, with adstock and saturation built in1. Geo tests are another, and a vendor describes using their results to update the model1.
Both give estimates, not facts. A channel's curve can move.
The same idea works for acquiring customers. Marginal CAC is what the next customer costs, not the average.
For ZFD: In our view, nobody should call a channel ready to grow before asking what the next slice would earn. See marketing budget allocation by marginal return. Where this sits among the methods is in MMM vs MTA vs incrementality tests.
Worked example
Easily confused with
Marginal ROAS vs iROAS (incremental ROAS)
Revenue the ads caused, divided by spend. Some definitions of iROAS are marginal ones, read as the slope of a response curve2. Our convention keeps the names apart: iROAS is the average effect measured in a test, mROAS is the effect of the next unit of spend.
Marginal ROAS vs ROAS
The average, as credited by a platform.
Marginal ROAS vs Break-even ROAS
The line the marginal return has to clear.
Marginal ROAS vs Scale
In reports, usually shorthand for "increase budget". It says nothing about the return on that increase.
FAQ
Is marginal ROAS lower than average ROAS?
Not always. A measurement vendor's example shows one channel with a marginal return far below its average and another with a marginal return above it1. That is the point: the average does not tell you which case you are in.
Is marginal ROAS the same as incremental ROAS?
Not in our convention. Here incremental ROAS is the average effect of the ads in a test, and marginal ROAS is the effect of the next euro. Some sources blur the two2.
Can I get marginal ROAS from my ad platform?
Not directly. Platforms report credited averages. You need modelling or tests to estimate the next euro.
Sources
Let’s find what’s actually working.
Next step. Start with what your average looks like on explicit assumptions. Use the Is your ROAS real? calculator.