A 4x ROAS is not the same as profit. This guide explains MER, POAS and contribution margin with a worked example so you can set targets that make money.
ROAS tells you how much revenue each ad dollar produced. It does not tell you whether you made money. For peptide and supplement brands, with product costs, shipping, refunds and fees, the gap can be large. Three measures close it: MER, POAS and contribution margin.
This is the measurement layer for our paid media strategy guide.
| Metric | Formula | Use it for |
| ROAS | Revenue attributed to ads / ad spend | Platform-level efficiency |
| MER (marketing efficiency ratio) | Total revenue / total marketing spend | Whole-business efficiency, independent of attribution |
| POAS (profit on ad spend) | Gross profit from ad-attributed sales / ad spend | Bidding and budget decisions |
| Contribution margin | Revenue minus product cost, shipping, payment fees, refunds and marketing spend | Whether growth is profitable |
POAS is ROAS multiplied by your gross margin. A POAS above 1 means the ad spend was covered by the gross profit it generated. Whether that is enough depends on your other costs.
These figures are made up to show the arithmetic. Replace them with your own.
| Line | Amount |
| Ad spend | $10,000 |
| Revenue attributed to ads | $40,000 (ROAS 4.0) |
| Product cost (35% of revenue) | $14,000 |
| Shipping and packaging | $3,200 |
| Payment fees | $1,200 |
| Refunds and chargebacks | $1,600 |
| Contribution after ad spend | $10,000 |
Here, gross margin before shipping and fees is 65%, so POAS is 4.0 x 0.65 = 2.6. After every cost, the business keeps $10,000 on $10,000 of spend. Now imagine product cost at 65% instead: gross margin falls to 35%, POAS to 1.4, and the same 4.0 ROAS leaves the business with a loss after shipping, fees and refunds. The ROAS did not change. The profit did.
Break-even ROAS is 1 divided by your contribution margin before ad spend. If you keep 50 cents of every revenue dollar after product, shipping, fees and refunds, you break even at 2.0 ROAS. Anything below it loses money, and the profit target sits above it. Compute this for each product line, not once for the whole store.
This is the same reasoning behind the bidding reset in our plateau case breakdown, where Target ROAS was reset using actual margin data and Shopping was segmented by margin tier.
Platform attribution can double count across channels or miss sales that arrive after a click-through from another channel. MER ignores attribution entirely: it divides all revenue by all marketing spend. Track it weekly next to platform ROAS. If platform ROAS rises but MER does not, you may be capturing demand you would have had anyway. Better tracking helps, so see our guides to the Meta Conversions API and GA4 enhanced conversions.
Use this to size spend with our advertising budget guide, plan promotions with our Black Friday guide, and see how structure and margin scale together in our scaling guide.
ROAS is revenue divided by ad spend. POAS is gross profit from ad-attributed sales divided by ad spend, which equals ROAS multiplied by gross margin.
Marketing efficiency ratio: total revenue divided by total marketing spend. It does not depend on platform attribution, so it is a useful check on platform numbers.
Divide 1 by your contribution margin before ad spend. A margin of 50% gives a break-even ROAS of 2.0.
No. Margins differ by product and bundle, so set targets by product tier.
Product cost, shipping, payment fees and refunds vary and can turn a healthy-looking ROAS into a loss. Contribution margin shows whether growth is profitable.
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