What is a Good ROAS in 2026? The Profitability Benchmark
What is a Good ROAS in 2026?
So you've opened your dashboard, looked at your Return on Ad Spend (ROAS), and wondered if that 3.5x is a badge of honor or a warning sign. The truth is, looking for a "universal" good ROAS is like asking what a "good" price for a house is—it depends entirely on the foundation.
In 2026, the digital landscape has shifted; platform automation is higher than ever, but so is the cost of entry. A "good" ROAS isn't a number you find on a benchmark chart—it's a number that keeps your business profitable after accounting for every real cost in your operation.
TL;DR: While a 4:1 (400%) ratio is a common industry benchmark, a high-margin digital product might thrive at 2:1, while a low-margin physical product might go bankrupt at 5:1. Your "good" ROAS is the one that exceeds your break-even point and aligns with your growth goals.
Why Industry Benchmarks Will Mislead You
Walk into any marketing forum and you'll hear conflicting advice: "You need at least 3x ROAS!" or "Anything below 5x means you're losing money!" The problem? These blanket statements ignore the fundamental economics of your specific business.
The Margin Makes the Difference
Consider two businesses, both achieving a 4:1 ROAS:
Business A sells digital courses with an 85% profit margin. Their £1,000 in ad spend generates £4,000 in revenue. After the £150 cost of delivering the product (15% of revenue), they pocket £3,850. Subtract the £1,000 ad spend, and they net £2,850 in profit. That's a 285% return on their marketing investment.
Business B sells physical products with a 20% profit margin. Their £1,000 in ad spend also generates £4,000 in revenue. But after the £3,200 cost of goods (80% of revenue), they're left with £800 in gross profit. Subtract the £1,000 ad spend, and they've just lost £200.
Same ROAS. Completely different outcomes.
This is why you cannot blindly chase a number someone else told you was "good." Your ROAS target must be reverse-engineered from your actual unit economics.
Factors Outside Your Control
The most significant factor weighing down your ROAS this year is platform inflation. As more businesses move their entire storefronts to digital-first models, the auction for eyeballs on Meta, Google, and TikTok becomes more crowded.
Increased Competition and CPMs
You might be doing everything right, but if a massive competitor decides to "buy" the market share in your niche, your costs will rise. CPMs (Cost Per Thousand Impressions) across major platforms have increased by an average of 15-20% year-over-year since 2024, according to industry reports.
This means the same creative, targeting, and landing page that delivered a 5x ROAS last year might only hit 3.5x this year—not because you're worse at marketing, but because the auction got more expensive.
Global Logistics and COGS
Furthermore, Global Logistics and COGS (Cost of Goods Sold) act as the invisible hand. Supply chain disruptions, increased shipping costs, and inflation in raw materials can silently destroy a previously healthy ROAS.
If your shipping costs increase by 10%, a ROAS that was profitable yesterday might be a loss-leader today. Your marketing didn't fail—your margins just got squeezed by factors outside the ad platform entirely.
Economic Conditions and Consumer Behavior
Broader economic uncertainty in 2026 has also shifted consumer behavior. Purchase hesitation is higher, average order values are under pressure in certain sectors, and the customer journey from first click to purchase has lengthened in many industries.
This means you might need more touchpoints (and therefore more ad spend) to convert the same customer than you did two years ago.
Factors Within Your Control
Fortunately, you have more levers to pull than you might realize. The path to a better ROAS isn't always about lowering your ad costs—sometimes it's about making every customer more valuable.
1. Increase Your Average Order Value (AOV)
The first lever is your Average Order Value (AOV). If you can use post-purchase upsells, "Frequently Bought Together" bundles, or tiered pricing strategies, you aren't just selling a product—you're increasing the efficiency of every pound spent on that initial click.
Real Example: An e-commerce brand selling skincare increases AOV from £45 to £62 through a simple "Buy 2, Get 15% Off" bundle offer at checkout. Their ROAS instantly jumps from 2.8x to 3.9x without changing a single thing about their ads.
When AOV increases, the same ad spend generates more revenue per transaction. This is one of the fastest ways to improve ROAS without touching your campaigns.
2. Optimize for Customer Lifetime Value (LTV)
Secondly, you must look at your Customer Lifetime Value (LTV). If your data shows that a customer acquired today for a 1.5x ROAS will return four times over the next six months without you spending another dime on ads, that "bad" ROAS is actually a brilliant long-term investment.
This is especially true for subscription businesses, consumable products, or services with high repeat purchase rates.
Shift Your Mindset: Don't evaluate ROAS on first-purchase alone. If you're in a business model with strong retention, you can afford to "lose" money on the first transaction because you'll make it back (and then some) over the customer's lifetime.
Set up cohort tracking to measure 30-day, 60-day, and 90-day LTV for customers acquired through paid ads. This data will reveal whether your ROAS is actually profitable when you zoom out.
3. Improve Your Conversion Rate
Every incremental improvement in your landing page Conversion Rate (CVR) has a multiplier effect on ROAS. If you're currently converting at 2% and you optimize your page to 3%, you've just increased your ROAS by 50% without spending an extra penny on ads.
Use our CVR Calculator to measure your current performance, then focus on the fundamentals: faster page load times, clearer value propositions, stronger calls-to-action, and simplified checkout flows.
Small CVR wins compound into massive ROAS improvements.
4. Refine Your Targeting and Creative
Bad targeting and poor creative don't just waste money—they actively depress your ROAS by attracting low-intent traffic that will never convert.
Review your campaigns ruthlessly:
- Are you targeting the right audience segments?
- Is your creative speaking to real pain points?
- Does your ad messaging match your landing page?
Even minor improvements in Click-Through Rate (CTR) and ad relevance can significantly improve your cost per conversion, which directly boosts ROAS.
5. Leverage Retargeting and Email
Your first-time ad viewers are the most expensive to convert. But retargeting warm traffic (people who visited your site, added to cart, or engaged with your content) typically delivers ROAS multiples higher than cold prospecting.
Pair this with email marketing to nurture leads acquired through paid ads, and you're maximizing the value of every pound spent on acquisition.
The Profitability Reality Check: Calculate Your Break-Even ROAS
Don't chase a "4x" because a guru told you to. You need to calculate your Break-Even ROAS. This is the point where your ad spend plus your product costs equal your revenue. Anything above this is profit; anything below is a slow leak in your bank account.
The Break-Even ROAS Formula
Break-Even ROAS = 1 / Profit Margin
If your profit margin (after COGS, shipping, fulfillment, but before ad spend) is 40%, your break-even ROAS is:
1 / 0.40 = 2.5x
This means you need to generate at least £2.50 in revenue for every £1 spent on ads just to break even. Anything above 2.5x is profit. Anything below is a loss.
Example Scenarios
Scenario 1: High-Margin Digital Product (80% margin)
- Break-Even ROAS = 1 / 0.80 = 1.25x
- A 2x ROAS is highly profitable
Scenario 2: Low-Margin Physical Product (25% margin)
- Break-Even ROAS = 1 / 0.25 = 4x
- A 3x ROAS is actively losing money
Scenario 3: Mid-Margin E-commerce (50% margin)
- Break-Even ROAS = 1 / 0.50 = 2x
- A 4x ROAS is doubling your money
See the difference? The same ROAS number can mean profit or bankruptcy depending on your margins.
Industry Benchmarks (As a Starting Point Only)
While your specific break-even ROAS should guide your targets, here are general 2026 benchmarks across industries for context:
- E-commerce (Physical Goods): 2.5x - 4x
- E-commerce (High-Margin/Digital): 1.5x - 3x
- SaaS/Software: 3x - 5x (often measured on LTV basis)
- Lead Generation/Services: 3x - 6x
- Retail/Low-Margin: 4x - 7x
These are averages and should only be used as a sanity check, not a goal. Your business is unique.
Stop Guessing, Start Calculating
To find your specific line in the sand, head over to our ROAS Calculator. Plug in your real margins, average order value, and costs, and stop guessing whether your ads are working.
A "good" ROAS in 2026 is one that:
- Exceeds your break-even point based on actual unit economics
- Aligns with your growth goals (Are you prioritizing profit or market share?)
- Accounts for LTV if you're in a repeat-purchase business
The moment you stop chasing arbitrary benchmarks and start optimizing toward your own profitability threshold, your entire paid advertising strategy becomes clearer, more focused, and infinitely more profitable.
Need help calculating your true break-even ROAS and building a campaign strategy around it? Contact me and let's map out your profitability targets together.