Blended ROAS averages every unit of spend together, so it falls slowly as you scale. Marginal ROAS isolates the return on the latest increase, and it usually falls much faster because of diminishing returns.
The practical rule: keep scaling while marginal ROAS stays above break-even ROAS. Once it drops below, the extra spend loses money even if the blended figure still looks healthy.
Formula
Marginal ROAS = (Revenue₂ − Revenue₁) ÷ (Spend₂ − Spend₁)
Example
Spend rises from ₹10 lakh to ₹15 lakh and revenue from ₹30 lakh to ₹39 lakh: marginal ROAS = 9 ÷ 5 = 1.8, while blended ROAS is 2.6.
Find the spend level where the next rupee or dollar stops paying back, before your P&L finds it for you.
Related terms
- ROAS (return on ad spend)ROAS is the revenue attributed to advertising divided by the cost of that advertising.
- Break-even ROASBreak-even ROAS is the return on ad spend at which an order covers its variable costs and its acquisition cost, leaving zero profit.
- Diminishing returns in advertisingDiminishing returns means each additional unit of ad spend produces less revenue than the one before it.
Where this comes up
The last rupee problem: scaling on marginal returnsAverage ROAS hides the moment scaling stops paying. Marginal ROAS shows it. A practical way to find that point before your P&L does.Part of the growth marketing glossary by Shiva Sharma.