Why You Shouldn’t Expect Your ROAS to Increase With Higher Budgets

In this episode of Tea Talks, Aaron and Matt tackle a common misconception in paid media: the expectation that your Return on Ad Spend (ROAS) should increase as you dial up your marketing budget.

The reality? It rarely works that way. The conversation digs into why, and what metrics you should pay attention to as you scale.

The Real Metric: MER, Not ROAS

• ROAS is useful, but it’s not the right metric for scaling.
• Marketing Efficiency Ratio (MER) is what really matters: total revenue divided by total ad spend.
• MER shows the true return on all marketing activity, not just what’s visible in platform reports.
• Attribution isn’t perfect. Many conversions and leads can’t be tracked 1:1, especially with high-consideration products or in-person sales.

Why ROAS Usually Falls as Spend Increases

• Ad platforms always go for the lowest-hanging fruit first: your most likely buyers.
• As you increase spend, platforms widen the net to less “ready” audiences, making sales harder to convert.
• Creative fatigue becomes a bigger problem at higher spend levels. Fresh assets are essential.
• It’s natural for ROAS to drop when scaling, and this isn’t necessarily a bad thing.

Profit Can Go Up Even as ROAS Goes Down

• Lower ROAS on higher spend can still yield far more profit in absolute terms.
• Example: £1,000 spend at 5x ROAS = £1,500 net profit; £10,000 spend at 3x ROAS = £5,000 net profit.
• It’s better to have a smaller slice of a much bigger pie.

Where ROAS Still Matters

• You must know your break-even ROAS to ensure you aren’t losing money.
• Beyond break-even, focus on how your total profit and revenue grow, not just the ROAS number.
• Consider lifetime value (LTV), not just first-purchase profitability.

The Power of Scaling (and Patience)

• More spend exposes more “leaks” in your funnel, helping you identify and fix weak spots.
• Brand awareness and long-term results compound with consistent investment, even if you can’t see every conversion right away.
• Don’t spread budget too thin. Focus on doing one thing well before diversifying.

Practical Advice from the Episode

• Calculate your true break-even ROAS so you know your minimum threshold.
• Track Marketing Efficiency Ratio (MER) for a real sense of business health.
• Invest in new creative as you scale, to fight fatigue and keep results strong.
• Be prepared for ROAS to drop, but don’t panic. Look at the bigger picture.
• Use increased ad spend to gather meaningful data, fix bottlenecks, and accelerate growth.

Key Takeaways

• Don’t expect ROAS to increase as you scale, expect the opposite, and plan accordingly.
• Focus on total profit, not just percentage returns.
• MER is a far more important metric for long-term growth than ROAS alone.
• Build brand, gather data, and embrace a longer-term view to unlock greater results.

Conclusion

Scaling your marketing budget is essential for growth, but it requires a shift in mindset. Rather than chasing ever-higher ROAS, focus on the broader business impact: total profit, MER, and sustainable brand building. Accept that ROAS may decrease as you scale, and use this as an opportunity to strengthen your creative, test new approaches, and keep your growth strategy grounded in real-world results. By doing so, you’ll position your brand for long-term success in an increasingly competitive market.

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