“Our ROAS is 2.4” is not good news or bad news. It depends entirely on what an order is worth after costs. A brand with ₹800 of contribution on a ₹1,500 order breaks even at a ROAS under 2. A brand with ₹400 of contribution on the same order needs nearly 4.
Every campaign should be judged against its own break-even line. Here is how to set it.
Step 1: Work out contribution per order
Take average order value and subtract everything an order costs before marketing:
- Tax included in the price
- Discounts and refunds
- Product cost
- Shipping and packaging
- Payment fees
- RTO cost on COD orders
What is left is contribution before marketing. If your average order is ₹1,800 and contribution is ₹720, then up to ₹720 of acquisition cost per order breaks even.
Step 2: Turn it into a ROAS
Break-even ROAS is the order value divided by the contribution per order:
Break-even ROAS = Average order value ÷ Contribution per order
₹1,800 ÷ ₹720 = 2.5. A campaign reporting a ROAS of 2.5 on the same revenue definition is breaking even. Above it, every order adds profit. Below it, every order loses money.
Two cautions:
- Use the same revenue definition as the platform. If Meta reports order value including tax, calculate break-even on order value including tax.
- The shortcut 1 ÷ gross margin is wrong for most D2C brands. It ignores shipping, fees, returns and RTO, and usually understates break-even by a lot.
Step 3: Adjust for the products a campaign sells
A campaign selling your high-margin hero and a campaign selling a heavy, discounted bundle should not share a target. Where you can, set break-even by product group, using the contribution of the products each campaign actually sells.
Step 4: Adjust for new and returning customers
Prospecting campaigns that bring new customers can sometimes run below first-order break-even, if those customers come back. That is a deliberate choice with a payback period, not a default. Set it explicitly:
- Retargeting and brand campaigns: at or above first-order break-even. These buyers were mostly coming anyway.
- Prospecting: break-even on first order plus the contribution from expected repeat orders within your payback window, and no more.
Step 5: Sort every campaign
With a break-even line for each campaign, the weekly review becomes simple:
| Campaign state | What to do |
|---|---|
| Well below break-even, meaningful spend | Fix the offer, audience or creative, or cut it |
| Near break-even | Hold; test improvements |
| Well above break-even, steady volume | Headroom: test more budget in steps |
| Above break-even on tiny spend | Probably noise; let it gather data |
Step 6: Check against the store, not just the platform
Platform ROAS uses the platform’s own attribution window, and every platform claims a share of the same orders. Before scaling anything, check the business-level numbers from your store:
- MER: all store revenue divided by all ad spend
- New-customer CAC: ad spend divided by first-time customers
- Profit after marketing: contribution minus ad spend
If campaigns all look above break-even but profit after marketing is falling, platform-reported returns are running ahead of what the store sees, and the real return is lower than reported. A holdout or incrementality test settles the argument.
Do it with Gran
The break-even ROAS calculator works out your line from a few numbers, free. Gran Ads does it every day from Shopify, Meta and Google: break-even ROAS from your own contribution per order, every campaign against it, the campaigns to fix and the ones with headroom, and MER and new-customer CAC from the store.
Shiva Sharma is a global growth marketing leader and the author of The Movement and Nobody Is Thinking About You. More about Shiva