Using ROAS (Return on Ad Spend) as a key metric to drive your Amazon account may seem intuitive, but it can lead to sub-optimal decisions for your overall business growth. Here are the main reasons why this KPI should not be the only decision-making lever:
1. Mismatch between short-term objectives and long-term strategy
Focusing on ROAS leads to investing only in highly profitable campaigns, often on flagship or best-selling products, or on keywords targeting your brand. This can hinder the development of new ranges or the promotion of products with long-term growth potential.
Advertising aimed at attracting new customers (e.g. via generic keywords or branding campaigns) often has an initially low ROAS, but plays a crucial role in creating a loyal customer base and increasing Lifetime Value (LTV).
2. Forget the organic impact
Advertising campaigns on Amazon boost organic sales by improving product rankings in search results (A9). ROAS measures only sponsored sales and ignores this positive effect on non-sponsored sales.
Tracking with more comprehensive metrics: Integrate tools like Amazon Marketing Cloud (AMC) to measure the total impact of campaigns (sponsored + organic).
3. Bias by product category or life cycle
Low-cost vs. premium products: ROAS is often higher for low-cost products, as customers buy more easily. This can lead to over-investment in these products, to the detriment of more profitable or strategic products.
Product launches: New products need advertising investment to gain visibility, which lowers ROAS in the first place. Focusing solely on this KPI can prevent successful launches.
Selling on Amazon.com in a highly competitive category vs. selling on Amazon.co.uk in the same category is completely different. Comparing your ROAS from one country to another makes no sense, because CPCs are different and so are market maturities.
4. Impact on customer experience and market share
Quality vs. quantity of sales: Optimizing purely for ROAS can limit the coverage of your keyword portfolio, reducing your exposure to new customer segments.
Loss of market share: Competitors can gain the upper hand if you target only high-ROAS keywords without seeking to broaden your audience.
5. A limited view of overall profitability
ROAS does not take overall costs into account. On Amazon, profitability depends on more than just advertising spend. Logistics costs (FBA), Amazon commissions, production costs and even product returns have a major impact on margins. A high ROAS can conceal a low gross margin if these costs are not included in the analysis.
TACOS (Total Advertising Cost of Sales): A better approach is to use TACOS, which analyzes advertising costs as a percentage of total sales, offering a clearer view of margins.
Conclusion:
ROAS, while useful as a one-off tracking indicator, does not allow you to steer an Amazon account in a strategic and sustainable way. Adopting an approach focused on global indicators specific to your objectives (profitability, market share, loyalty) will enable you to maximize your brand's growth on Amazon.
FAQ
ROAS (Return on Ad Spend) is an indicator that measures the revenue generated for each dollar spent on advertising. It is commonly used to evaluate the effectiveness of online advertising campaigns. However, relying solely on ROAS can limit an overall view of performance, as it does not take into account organic sales and other key factors.
ROAS focuses solely on sales from sponsored advertising, neglecting the impact of campaigns on organic sales and product rankings. What's more, an excessive focus on ROAS can hinder investment in new products or long-term strategies, limiting overall growth.
TACoS (Total Advertising Cost of Sales) is a recommended alternative. It measures advertising expenditure as a percentage of total sales, offering a more comprehensive view of profitability by including both sponsored and organic sales. This approach makes it possible to assess the overall impact of advertising campaigns on total sales.
Advertising campaigns increase the visibility of products, which can improve their ranking in Amazon's organic search results. Improved visibility often leads to increased organic sales, an aspect that ROAS doesn't capture, but which is essential for sustainable growth.
New products often require a higher initial advertising investment to gain visibility, which may result in a lower ROAS at the outset. However, this investment is crucial to establishing the product's presence in the market and driving long-term growth. Ignoring this dynamic can lead to decisions that put the brakes on new product development.
It's essential not to focus solely on high ROAS campaigns that promote current bestsellers. Investing in campaigns to attract new customers, promote new products and build brand awareness may result in a lower initial ROAS, but these actions are essential for sustained growth and customer expansion over the long term.
Every Monday between 7:30 and 8:15 AM receive our newsletter (over coffee or tea) and improve your Amazon knowledge with us.
Les Pitchous is a consulting firm specializing in helping brands accelerate their growth on Amazon.
If you like our content and would like to know more about our services, you can contact us here.
Since our company was founded, we've been proud to donate 1% of our sales each year to the 1% for the planet movement.(To find out more about our involvement)
- Why doesn't Amazon DSP work for every business?
- Amazon SEO and product listing optimization: A complete guide to maximizing your sales in 2025
- Why can't brands ignore Retail Media in 2025?
- Customer testimonial : La boîte à bonbons x Les Pitchous
- Why is it important not to use the ROAS KPI to manage your Amazon account?
