Boosting ROAS the Smart Way: The Math Behind More Profitable Ads

I’d be honest. When I first moved into digital marketing from a background in math and quantitative finance, I saw things a little differently. While most marketers focused on creative storytelling and audience psychology (which are undeniably important), I naturally gravitated toward the numbers. I wanted to break down ad performance the way I would analyze financial models—through data, formulas, and strategic optimizations.

One of the biggest misconceptions I’ve seen in performance marketing is the belief that cutting costs alone improves Return on Ad Spend (ROAS). Many marketers think that slashing CPC (Cost Per Click) or reducing spending on “underperforming” campaigns is the key to profitability. But that’s only part of the equation.

ROAS isn’t just about how much you spend, it’s about how much value you generate from every dollar. And to truly optimize ROAS, you need to understand its mathematical makeup. In this post, I’ll break ROAS down into its three core components — Average Basket Size (ABS), Conversion Rate (CVR), and Cost Per Click (CPC), and show you the strategic levers you can pull to drive better ad performance.

Let’s get into it. 🚀

What is ROAS? (Defining the Formula)

Let’s start with the basics. Return on Ad Spend (ROAS) is one of the most critical metrics in performance marketing. It tells you how much revenue you’re generating for every dollar spent on advertising.

ROAS Formula:

For example, if you spend $1,000 on ads and generate $3,000 in revenue, your ROAS is $3,000 / $1,000 = 3

This means you’re earning $3 for every $1 spent.

While a higher ROAS is ideal, blindly optimizing for it by just cutting costs can be misleading. To truly maximize ad performance, we need to break it down further.

Breaking Down ROAS: The 3 Key Components

ROAS is influenced by three key factors:

1. Average Basket Size (ABS)

What it means: The average amount a customer spends per purchase.

Why it matters: If customers spend more per transaction, your revenue increases without needing more conversions.

2. Conversion Rate (CVR)

What it means: The percentage of visitors who clicked on an ad and made a purchase.

Why it matters: Higher conversion rates mean you extract more value from the same traffic.

3. Cost Per Click (CPC)

What it means: The cost of acquiring each visitor to your site.

Why it matters: Lowering CPC without sacrificing traffic quality means getting more conversions for the same budget.

Rewriting ROAS using these components:

This equation makes it clear: To improve ROAS, you need to increase ABS, improve CVR, or lower CPC. Let’s dive into how you can optimize each.

Strategies to Improve ROAS via Each Component

A. Increasing Average Basket Size (ABS)

Let’s take an e-commerce brand as an example. Instead of focusing on acquiring more customers, they increased revenue by maximizing how much each customer spends.

Tactics to Increase ABS

✅ Upsells & Cross-sells: Recommend complementary products (e.g., “Frequently bought together” or post-purchase upsells).

✅ Bundling: Offer product bundles at a slight discount to encourage higher spending.

✅ Free Shipping Thresholds: Set free shipping at a slightly higher value than the average order to push customers to buy more.

🛍️ Case Study: Ravin Boosting Average Basket Size (ABS)

Ravin, an online fashion retail brand, implemented Wiser’s product recommendation engine to enhance customer engagement. By displaying related and frequently bought together items on product pages, they achieved a 30% increase in conversions and a 12% increase in sales.

B. Boosting Conversion Rate (CVR)

Let’s say you’re running a subscription app. You get clicks, but many users drop off before converting. Improving CVR means turning more of those clicks into paying customers.

Tactics to Improve CVR

✅ Landing Page Optimization: Make checkout seamless, ensure fast-loading pages, and optimize for mobile.

✅ A/B Testing Offers & Creatives: Experiment with different CTAs, ad visuals, and pricing models to see what converts best.

✅ Trust Signals & Social Proof: Showcase reviews, testimonials, and security badges to reduce buyer hesitation.

🥗 Case Study: FastEasy Boosting Conversion Rate (CVR)

FastEasy, a mobile fitness app, faced challenges in efficiently conducting A/B tests for their campaigns. By integrating Reteno’s AI-powered marketing automation platform, they were able to run multiple experiments simultaneously without relying heavily on developers. This approach led to a 29% boost in conversion-to-subscription rates.

C. Lowering Cost Per Click (CPC)

A mobile gaming app wanted to scale its paid campaigns while maintaining profitability. Lowering CPC without sacrificing quality was the key.

Tactics to Reduce CPC

✅ Better Targeting: Use lookalike audiences, retargeting, and negative exclusions to focus on high-intent users.

✅ Ad Quality Score: Platforms like Google Ads reward high-relevance ads with lower CPCs. Improve ad copy, CTR, and landing page experience.

✅ Bid Optimization: Adjust bids based on performance insights such as time of day, device, and geo-targeting can significantly impact CPC.

🕹️ Case Study: Voodoo Games Lowering Cost-per-Install

Voodoo Games, a French mobile game publisher, by actively testing more than 500 videos a week for their hit game Mob Control, reduced their CPI and surpassed $200M in revenue at an average of 150% ROAS.

Final Thoughts: The Smarter Approach to ROAS

Improving ROAS isn’t just about spending more, it’s about spending smarter. By understanding the math behind ROAS and optimizing its key components — Average Basket Size (ABS), Conversion Rate (CVR), and Cost Per Click (CPC), you can make strategic, high-impact changes that drive better profitability.

At the core of all successful ad campaigns is data-driven decision-making. Testing, iterating, and refining based on real numbers, not just gut feelings, ensures that every dollar you invest works harder for you.

So, what’s your biggest challenge with ROAS? Drop a comment below, and let’s discuss! 🚀