ROAS vs ROI vs MER: Which Metric Should Guide Your Ad Spend?
The difference between ROAS, ROI and MER, how to calculate each, and which one to use for budget decisions.
Marketing dashboards are full of acronyms. Three of the most important are often confused, which leads to poor budget decisions. Here is what each one tells you.
ROAS: revenue per rupee of ad spend
Return on ad spend is revenue attributed to ads divided by ad spend. If ₹50,000 of spend is credited with ₹2,00,000 of sales, ROAS is 4. It is useful for comparing campaigns, but platforms often credit the same sale to multiple ads.
ROI: profit, not revenue
Return on investment compares profit with total cost. A 4x ROAS can still lose money if product margins are thin. ROI includes product costs, fees, shipping and returns, which is why it is the metric owners care about.
MER: the blended view
Marketing efficiency ratio is total revenue divided by total marketing spend across all channels. Because it does not rely on attribution, it shows whether marketing as a whole is working, even when platform numbers overlap.
Calculate breakeven ROAS
Breakeven ROAS equals 1 divided by your contribution margin before advertising. With a 40% margin, breakeven ROAS is 2.5. Campaigns below that lose money on first orders unless repeat purchases justify it.
Use them together
Use ROAS to optimise within a platform, MER to judge overall spend, and ROI or contribution margin to decide how much to invest. Review all three monthly.
Need help putting this into practice? Gravmo offers performance marketing. Get a proposal or message us on WhatsApp.
Frequently asked questions
Is a 3x ROAS good?
It depends on your margins. Calculate breakeven ROAS first.
Why does Meta report more sales than my store?
Different attribution windows and view-through credit cause overlap.
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