In the world of digital marketing, ROAS (Return on Ad Spend) is often celebrated as the key measure of a campaign’s performance. Yet when businesses chase the illusion of high ROAS, they may be overlooking deeper issues: poor customer quality, high churn, low satisfaction, and ultimately, unsustainable growth.
This article explores the limitations of ROAS and demonstrates why metrics like Customer Lifetime Value (CLTV), retention, and referrals matter more for long-term success.
1. The Problem with ROAS as a Standalone Metric
1.1. ROAS Ignores Profitability
ROAS measures revenue earned for every pound spent—but doesn’t account for product costs, logistics, marketing overhead, or margins. As highlighted in recent marketing debates, “ROAS does not equal profit” Admetrics. A shiny 10× ROAS can still leave you in the red if margins are razor-thin.
1.2. ROAS Often Comes at the Expense of Future Growth
Focusing solely on ROAS tends to prioritise retargeting existing audiences—quick wins that can inflate ROAS but stall brand growth. Over time, this approach chokes prospecting efforts and starves the funnel, ultimately raising Customer Acquisition Cost (CAC). STRYDE Canopy Management.
1.3. It Downplays Long-Term Value and Loyalty
Repeating major research findings: ROAS captures initial revenue but misses the extended value customers offer over time. Metrics like CLTV tell a far more complete story about a customer’s contribution to your bottom line trafiki-ecommerce.com AppsFlyer Saras Analytics.
1.4. Attribution & Data Privacy Issues Undermine ROAS Accuracy
Modern attribution is complex. With iOS updates and privacy changes, tracking and attribution suffer — meaning ROAS figures may be overestimated or skewed.
2. When a Client Asks to Improve ROAS — Offer These Three Scenarios
Imagine a client asks: “We want better ROAS. What can you do?” You can give them three scenarios — each with different types of customers, results, and business outcomes:
| Option | Description | ROAS | Customer Type | Churn | Customer Satisfaction | CLTV | Referrals |
| 1 | Acquire low-quality customers who leave quickly | ~10× | Poor | High | Negative | Low | Few |
| 2 | Acquire average customers with moderate retention | ~5× | Average | Average | Average | Moderate (~₹5,000) | Occasional |
| 3 | Acquire high-quality, loyal customers | ~2–3× | Excellent | Low | High | High (>₹10,000) | Strong |
Most business owners would choose Option 3 because:
- It brings in the right customers
- It minimises churn
- It maximises CLTV and long-term revenue
Yes — ROAS is still important. Yet if you must choose between short-term returns and long-term customer value, the latter wins every time.
3. Why ROAS Is Overrated — Core Limitations
3.1. Chasing ROAS Can Hurt Brand Building
Over-optimising ad budgets for immediate ROAS leads to neglect of brand awareness and top-of-funnel campaigns — essential components of long-term growth STRYDE Canopy Management.
3.2. ROAS Doesn’t Reward Loyalty
Suppose you spend more on acquisition but see low returns in the short term. A business focused on loyalty sees bigger payoffs over time as satisfied customers make repeat purchases or refer others.
3.3. The Lack of Context Around ROAS Makes It a Vanity Metric
Great ROAS doesn’t mean you’re actually profitable. A high ROAS can conceal poor margins, inflated analytics, or unsustainable retention patterns.
4. A Holistic Approach to Marketing Metrics — Beyond ROAS
4.1. Merge ROAS with CAC, CLTV & MER
- CAC (Customer Acquisition Cost): what it truly costs to win a new customer.
- CLTV: revenue expected from a customer throughout their lifetime.
- MER (Marketing Efficiency Ratio): total revenue divided by total marketing spend — a holistic measure.
4.2. Prioritise LTV:CAC Ratio
A good benchmark is 3:1 — for every £1 spent, you ideally want £3 in lifetime value. Anything lower may signal unsustainable growth.
4.3. Optimise for Retention & Referrals
Happy customers deliver repeat purchases and word-of-mouth marketing. Investing in experience, loyalty programmes, and personalised engagement drives CLTV and lowers churn.
4.4. Focus on Profitability, Not Just Revenue
ROAS = Revenue / Ad Spend
But Profitability = Revenue − All Costs (COGS, operating, logistics, etc.)
A campaign with moderate ROAS but high margin can outperform one with higher but deceptive ROAS Admetrics House of Hardway.
5. Our Approach: Building a Sustainable Customer-Centric System
Our goal? Not just to chase quick ROAS, but to build a sustainable sales engine driven by:
- High CLTV
- Strong retention & referrals
- Minimal churn
When you optimise across the customer lifecycle — not just ads — metrics like ROAS, CAC, and cost-per-click improve organically.
Key Layers of Improvement:
- Target acquisition of quality customers (not just cheap clicks)
- Optimise onboarding & experience to reduce churn
Encourage referrals and repeat purchases for compounding value
6. Real Examples: Why ROAS Isn’t Enough
6.1. High ROAS, Low Value
A fashion brand achieved a dazzling 10× ROAS by targeting returning customers. However, half of them never returned after their first purchase, resulting in poor long-term profitability.
6.2. Moderate ROAS, High Impact
Another client saw 5× ROAS, but focused on new customer acquisition and retention strategies. Over time, CLTV doubled, and referral volume rose — illustrating a better ROI than any ROAS measurement suggested.
6.3. Accepting Lower ROAS for Lasting Value
A premium skincare brand opted for 2–3× ROAS campaigns focused on brand awareness and long-term loyalty. The result? A high CLTV (₹10,000+), extremely low churn, and rapid organic referrals. A clear win in the longer game.
7. FAQs on ROAS Limitations
Q1. Is ROAS not useful at all?
ROAS is a valuable indicator of ad efficiency—but only in context. Use it alongside broader business metrics like CAC, CLTV, and retention.
Q2. What should I focus on instead of ROAS?
Focus on metrics that reflect real business health: LTV:CAC ratio, profit per customer, and churn rates.
Q3. What’s a healthy LTV:CAC ratio?
A good benchmark is 3:1, but it depends on margin and time to break even.
Q4. Can high ROAS actually hurt us?
Yes—if it’s built on targeting existing users only. It limits growth and can hide retention issues.
Q5. Does focusing on CLTV mean spending more?
Usually, yes—upfront acquisition costs may rise. But the returns over three to six months often justify the expense with compounding value.
Q6. Does focusing on ROAS alone risk business failure?
Quite often. Without retention strategies, high ROAS campaigns can drain budgets quickly without lasting returns.
Conclusion
ROAS is not the be-all and end-all of marketing success. While useful, it can easily mislead marketers into focusing on short-term returns at the expense of long-term business health.
What truly drives sustainable growth?
- Acquiring the right customers, not just cheap ones
- Retaining them, reducing churn
- Maximising lifetime value and referrals
- Balancing acquisition and retention costs to maximise profit
In short: prioritise quality over quick wins. Build systems that reward loyalty and longevity, not just flashy ad returns.
When you align your strategy for retention, CLTV, and profitability – everything from ROAS to CTR improves as a natural consequence of healthier marketing.