Framework
Performance Max Commercial Framework
Move beyond ROAS targets. This framework helps you evaluate Performance Max based on what actually matters to your business.
The Problem with ROAS
ROAS is a ratio, not a profit figure. A 5x ROAS on £10,000 spend is very different from 5x on £100,000 spend. Performance Max often optimises for the metric, not the outcome.
This framework shifts focus to contribution margin, what's left after product costs, ad spend, and variable costs.
Step 1: Calculate Your Breakeven ROAS
Example: If your product costs 40% of revenue and variable costs (shipping, payment fees) are 15%, your breakeven ROAS is:
Any ROAS below this means you're losing money on the ad spend.
Step 2: Define Your Target Contribution
Decide what contribution margin you need from paid acquisition. This should factor in:
- Fixed overheads to cover
- Desired profit margin
- Customer lifetime value (if applicable)
- Cash flow requirements
A typical healthy ecommerce business needs 15-25% contribution after ad spend to remain profitable.
Step 3: Set Asset Group Targets
Not all products are created equal. Segment your Performance Max asset groups by margin tier:
Step 4: Monitor & Adjust
Weekly, calculate actual contribution margin from Performance Max:
If contribution is positive and growing, scale. If not, diagnose whether it's a spend efficiency or product mix issue.
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