How to set a target ROAS from your margin

Target ROAS = 1 ÷ (contribution margin − profit you want to keep). A product with a 25% margin that keeps 10% of revenue needs 1 ÷ 0.15 = 6.67, which you enter in Google Ads as a target ROAS of 667%.

Google Ads asks you for a target and only suggests one from your recent results. This guide derives it from margin instead: break-even ROAS gives the floor, and the profit you want to keep sets the target above it. The break-even ROAS calculator lets you check every figure, and the guide builds on break-even ROAS per product, so read that first if the 1 ÷ margin rule is new.

What Google Ads allows is quoted from Google Ads Help; where the advice is ours, the text says so.

What is a good target ROAS?

A good target ROAS is 1 ÷ (contribution margin − profit you want to keep), with both as a share of revenue excl. VAT, so it differs from shop to shop. Set the profit to 0% and you get break-even ROAS, the lowest target that does not lose money on each sale. The same floor in profit terms is a POAS of 1.0 (POAS vs ROAS).

For example, a product has a 25% margin, so break-even ROAS is 1 ÷ 0.25 = 4. If you want to keep 10% of revenue as profit after ads, the target is 1 ÷ (0.25 − 0.10) = 6.67, a target ROAS of 667%. You can check it: €100 of ad spend at a ROAS of 6.67 returns €667 of revenue, 25% of that is €166.75 of contribution, and after the €100 of ads €66.75 is left, which is 10% of the revenue.

Replace the example below (price €100.00, a 25% margin, 10% kept) with your own numbers to see your break-even ROAS, target ROAS and POAS.

The target climbs faster than the profit you ask for. As the profit you want approaches the margin, less room is left for ad spend and the ROAS needed shoots up. Keeping 15% of revenue from a 25% margin needs a target ROAS of 1,000%.

Target ROAS by margin and profit kept

Find your margin in the left column and the profit you want to keep along the top. Each cell shows the target ROAS as the percentage Google Ads asks for: 1 ÷ (margin − profit kept) × 100%.

“Not possible” means the profit you want is as large as the margin, so no ROAS can deliver it. The break-even ROAS calculator handles other values. It works on revenue incl. VAT by default: if your conversion values exclude VAT, enter revenue excl. VAT and set VAT to 0%.

What is target ROAS in Google Ads?

Target ROAS is a bid strategy where you set the average conversion value you want for each unit of ad spend, and Google Ads adjusts bids to maximise conversion value while reaching it. Google describes the target as the average conversion value you want per dollar spent, so a target of 500% means 5 for every 1 spent (Google Ads Help, About Target ROAS bidding). Its own example is a shop that wants $5 of sales for each $1 on ads and sets 500%.

It only works if every purchase has a value: Google Ads Help explains how to track transaction-specific conversion values.

A 400% target makes a profit on a 40% margin product and loses money on a 20% margin product, so read any target next to the margin of the products it covers.

Google’s suggestion comes from your own history

There are two starting points. When you create a strategy, Google Ads recommends a target “calculated based on your actual ROAS over the last few weeks”, leaving out the last few days to allow for conversion delay, and you can use it or set your own.

Its tips say to set the target “based on your business goals as well as your historical ROAS performance as a reference”, after reporting values for 4 weeks or one to two conversion cycles, whichever is longer. The Shopping setup page suggests the average conversion value divided by cost over the last 4 weeks.

Margin is the business goal in that sentence. History tells you what your campaigns achieved, and in a mixed account it can mislead: if past ROAS came mostly from high-margin products, the suggestion looks comfortable and says nothing about the low-margin products funded by the same campaign. Start from margin and use Google’s figure as a sanity check.

How do you calculate and set a target ROAS?

Calculate it in five steps, then enter it as a percentage in the campaign’s bid strategy settings. The margin work in step two only needs doing once per product.

In a Shopping campaign, Google’s steps are: Campaigns, select the campaign, Settings, Bidding, Change bid strategy, then choose Target ROAS and enter your target (Set up Target ROAS bidding for Shopping campaigns). To share one target across campaigns, create a portfolio strategy under Tools, Budgets and bidding, Bid strategies.

The target ROAS calculator does the margin step for you: enter revenue, VAT, cost of goods and the variable costs, and it returns the margin and the break-even ROAS. It also has a field for the profit to keep.

Do your best sellers first; they eat most of the budget. If you don’t have margins for every product yet, begin with a category average and replace it as better numbers come in. To check one product’s margin and markup from its cost and selling price, use the margin and markup calculator.

Returns, payment fees and shipping you pay for the customer all lower the margin, and an overstated margin gives a target that is too low. When in doubt, use the lower margin. A target that is slightly high costs some volume, and one that is too low costs money.

Choosing the profit to keep

Use your fixed costs, as a share of revenue, as the floor for the profit you keep. If rent, salaries and software come to 8% of revenue, a campaign that keeps less than 8% of revenue after ads does not cover them. Anything you keep above that is profit, or money you choose to reinvest in growth.

For example, with fixed costs at 8% of revenue, the target for a 25% margin product is 1 ÷ (0.25 − 0.08) = 5.88, a target ROAS of 588%. That floor is our rule of thumb, and it treats all revenue alike.

A share-of-revenue goal is not the same as the most profit in euros. A higher target holds back the weaker clicks, so spend and revenue both fall. The table shows this with invented numbers for one 25% margin product group at six targets.

Illustrative data.

Only the profit arithmetic is real here (revenue × 25% − ad spend). In this example a target ROAS of 600% earns the most euros, and 667% gives up €50 for a higher share of each euro. If you want the highest profit, the best target may sit below the one the formula gives. If you want to protect a margin percentage, use the formula.

In a real account the spend and revenue at each target are estimates. Google’s bid simulator uses data from the auctions you took part in over the last 7 days and shows what would have happened with a different target, assuming everything else stayed the same (Google Ads Help). Use it to check a target from this guide, not to replace the margin.

Target ROAS lives on the campaign

Google Ads Help documents the target at campaign level, or across several campaigns with a portfolio strategy. It does not document a separate target for a Shopping product group or a Performance Max asset group. What the pages say:

Splitting by margin band

Because the target sits on the campaign, a different target for a margin band means a separate campaign for that band. That is our suggestion, not a Google rule, and it works against Google’s own guidance: “Performance will generally improve if you run fewer, larger campaigns that get more conversions.”

The case for doing it anyway is the margin: break-even and target ROAS both rise as margin falls, and the same profit goal needs a very different ROAS at each margin.

A single target ROAS of 400%, say, funds products that sit below their own break-even and holds back products that would be profitable at a much lower ROAS. The earlier post works through two products against one target.

So we suggest two to four margin bands, for example under 25%, 25% to 40% and over 40%, each in its own campaign, and no more bands than your conversions can feed. Use the band’s lowest margin when you work out its target, so no product in the band ends up below its own break-even.

For example, take three bands and a goal of keeping 10% of revenue. A band whose lowest margin is 20% gets a target ROAS of 1,000% (1 ÷ 0.10 = 10), one starting at 30% gets 500% (1 ÷ 0.20 = 5), and one starting at 50% gets 250% (1 ÷ 0.40 = 2.5).

To do this for every product at once, download the per-product break-even sheet (XLSX, free, no sign-up). It calculates the target ROAS for each product from a “profit to keep” input, next to the break-even ROAS and the verdict.

Enough conversions per band

Google lists “at least 15 conversions in the past 30 days at the conversion tracking level” for Search and Shopping, and the Shopping setup page says “at least 15 conversions per Merchant Center ID in the last 30 days”. Neither page says whether that is counted per campaign, so we suggest treating 15 as the least a single campaign should have, and aiming well above it.

Here campaign C has 9 conversions and is the one to merge with B. Using the merged band’s lowest margin, 15%, and keeping 10% of revenue, the target ROAS is 2,000% (1 ÷ (0.15 − 0.10) = 20). Band B on its own, at a 25% lowest margin, would get 667% (1 ÷ (0.25 − 0.10) = 6.67).

Merging has a cost either way. B’s products would carry a much higher target than they need, which gives up volume. Or you accept a lower profit kept for the merged band, which lowers the target but leaves less profit. Using B’s target ROAS of 667% for the merged band would only reach the break-even ROAS of a 15% margin product, 6.67, so C’s thinnest products would earn nothing.

Building the bands

You need a field that says which band a product is in. Google recommends using custom labels to group products, and in Performance Max you target those labels in listing groups (listing groups). A margin-band label is one you add to your feed.

A margin band says what a product needs to earn; Product Segmentation shows what it is earning. It is part of Product Metrics, product-level optimisation software for Google Shopping and Performance Max: its ML places each product in one of six segments (Stars, Question Marks, Cash Cows, Dogs, Drainers, Ghosts) by ad clicks and ROAS, or POAS once you connect margins, and writes the segment to a second Merchant Center label next to your margin band. You approve every label it writes.

Use margin to set the target and the segment to see how each product performs against it, as the Performance Max page describes.

Pacing a target change

Move the target in steps and give each step time. Google Ads Help says the bidder “will react immediately but will need some time to hit the new target (give it 1-2 conversion cycles)”, and the Shopping page suggests 15 days before judging performance, reviewing weekly rather than daily when traffic is low. A conversion cycle is the time a typical customer takes from click to purchase.

Google also says that to increase volume you can gradually reduce the target, and to increase conversion value you may increase it. Moving a band’s target ROAS from 400% to 667% in one go is a large change. We suggest moving to 500% first, waiting, and then going further.

When you review, compare actual ROAS with break-even as well as the target. Allow for conversion lag too, because purchases that follow an earlier click arrive in your data days later and make the latest week look worse than it is. Google adds that from 17 August 2026 it is updating how target-based strategies behave for campaigns limited by budget, which may cause temporary fluctuations (About Target ROAS bidding).

A band between break-even and target is profitable but below your goal. A band below break-even is losing money on each sale, and its products need a lower priority or a fix to price or costs. The break-even ROAS guide covers what to do per band.

Target ROAS, target CPA or maximise conversion value?

Google’s comparison table says Target CPA is for getting conversions at a specific return target when all conversions are treated equally, and Target ROAS for when conversions have different values for your business. Target CPA sets bids “to help get as many conversions as possible at the target cost-per-action (CPA) you set” (Target CPA).

The two are linked by one identity. When a conversion is worth the order value, target CPA = average order value excl. VAT × (margin − profit kept). At an €80 average order, a 25% margin and 10% kept, that is €80 × 0.15 = €12.00, the same as €80 ÷ 6.67. The identity is our arithmetic.

That is why ecommerce usually needs ROAS. A €40 product with the same margin and profit goal has a CPA of €6.00, so one CPA target over-funds one order and starves the other, while one ROAS target fits both.

Maximise conversion value aims for the highest conversion value within your budget, with no return target. Google’s page adds that with a target ROAS set it behaves like a Target ROAS strategy, and that if you have a return goal you may want to switch. Whichever you choose, the number has to come from somewhere. One derived from margin can be explained to a client or a finance team in a sentence.

From margin to a live target

POAS vs ROAS covers how the two measures relate and what is a good ROAS what counts as good; Performance Max for ecommerce and how to optimise Google Shopping ads show how to apply targets per campaign, and Product Segmentation which products sit over or under their band’s target.

The work itself is short: put your best sellers through the target ROAS calculator, add the profit share you want to keep, and group the products by margin band.

Sources

• About Target ROAS bidding, Google Ads Help
• Set up Target ROAS bidding for Shopping campaigns, Google Ads Help
• About Performance Max campaigns and Manage a Performance Max campaign with listing groups, Google Ads Help
• About Target CPA bidding and About Maximize conversion value bidding, Google Ads Help
• Understand how budget and goal changes may impact Smart Bidding, Google Ads Help