How to Calculate and Improve ROAS for Shopping Campaigns

ROAS (Return on Ad Spend) is the metric that tells you whether your Google Shopping campaigns are actually making money. Yet many advertisers either calculate it incorrectly, don't know what "good" looks like for their business, or fail to analyze it at the product level where real optimization opportunities hide.

This guide covers everything you need to know about ROAS for Shopping campaigns: how to calculate it correctly, what targets to set based on your margins, and seven proven strategies to improve it. If you're new to Shopping analytics, you may want to start with our complete guide to Google Shopping analytics first.

What is ROAS and Why Does It Matter for Shopping?

ROAS measures how much revenue you generate for every dollar spent on advertising. It's calculated as:

A 5x ROAS means you're generating $5 in revenue for every $1 you spend on ads. But here's what many advertisers miss: revenue isn't profit. A 5x ROAS could be incredibly profitable or barely breaking even, depending on your margins.

For Shopping campaigns specifically, ROAS matters more than for other campaign types because:

• Product-level variation: Your products have different margins, so the same ROAS means different things for different SKUs
• Direct response: Shopping ads are bottom-of-funnel—users are ready to buy, so conversion tracking is more reliable
• Competitive pricing: Your ROAS is directly impacted by how your prices compare to competitors

The Danger of Averages

Looking at account-level or campaign-level ROAS can be misleading. A "healthy" 4x ROAS at the campaign level might actually consist of:

• 20% of products at 10x ROAS (your stars)
• 30% of products at 3x ROAS (solid performers)
• 50% of products at 0-1x ROAS (budget drains)

Without product-level analysis, you're optimizing in the dark. This is why tools like SKU Analyzer focus on SKU-level ROAS rather than aggregate metrics.

How to Calculate ROAS (The Right Way)

The Basic Formula

The formula itself is simple, but getting the inputs right matters:

• Revenue: Use conversion value from Google Ads (typically order revenue)
• Cost: Ad spend for the same time period

According to Google's documentation on ROAS, the metric in Google Ads is calculated as "Conv. value / cost" and represents the total conversion value divided by advertising costs.

ROAS vs ROI vs Profit Margin

These three metrics are often confused. Here's how they differ:

Metric	Formula	What It Tells You
ROAS	Revenue / Ad Spend	Revenue generated per dollar of ad spend
ROI	(Profit - Cost) / Cost	Net return on total investment
Profit Margin	(Revenue - COGS) / Revenue	Percentage of revenue that's profit

ROAS is most useful for day-to-day campaign optimization because it directly ties ad spend to revenue. ROI is better for overall business decisions that factor in all costs.

Calculating Your Target ROAS Based on Margins

Your target ROAS should be based on your actual profit margins, not arbitrary benchmarks. Here's the formula for break-even ROAS:

This means with 40% margins, you need at least 2.5x ROAS just to cover product costs and ad spend. Any ROAS above this is profit; below is loss.

Gross Margin	Break-Even ROAS	Target ROAS (20% profit)
20%	5.0x	6.25x
30%	3.33x	4.17x
40%	2.5x	3.13x
50%	2.0x	2.5x
60%	1.67x	2.08x

What's a Good ROAS for Google Shopping?

Industry Benchmarks

While your target should be based on your margins, industry benchmarks provide useful context. Search Engine Journal publishes regularly updated Shopping ads benchmarks across verticals:

Industry	Typical ROAS Range	Notes
Fashion/Apparel	3x - 5x	Higher margins, competitive market
Electronics	5x - 8x	Lower margins require higher ROAS
Home & Garden	4x - 6x	Mixed margins by category
Beauty & Cosmetics	3x - 4x	High margins, repeat purchases
Sports & Outdoors	4x - 6x	Seasonal variation

ROAS by Product Category

Different products in your catalog will have different acceptable ROAS thresholds:

• High-margin products (60%+): Can be profitable at 2x ROAS or lower
• Medium-margin products (30-60%): Typically need 3x-4x ROAS
• Low-margin products (under 30%): May require 5x+ ROAS to be worthwhile

This is why product-level ROAS analysis is essential. Judging all products by the same ROAS standard leads to either over-investing in low-margin items or under-investing in high-margin ones.

Where to Find ROAS Data in Google Ads

Google Ads provides ROAS data at multiple levels, but product-level reporting requires some navigation:

1. Go to your Shopping campaign
2. Click on "Products" in the left sidebar
3. Add the "Conv. value / cost" column if not visible
4. This shows ROAS for each individual product

Limitations of native reporting: The Google Ads interface shows performance data, but doesn't combine it with Merchant Center attributes like brand, product type, or custom labels. This makes segmentation analysis difficult without manual data exports. Our Shopping reporting guide covers how to overcome these limitations.

Dedicated analytics tools address this by merging data from both platforms. SKU Analyzer, for example, combines Google Ads performance with Merchant Center attributes, letting you analyze ROAS by brand, filter by custom labels, and identify patterns across product segments.

7 Proven Strategies to Improve Shopping ROAS

1. Eliminate Wasted Spend

The fastest way to improve ROAS is to stop spending money on products that don't convert. Wasted spend is ad cost on products that generate clicks but zero sales.

How to identify wasted spend:

1. Filter products where Cost > $0 and Conversions = 0 (these are your zero conversion products)
2. Use a meaningful time window (30-90 days)
3. Sort by cost to find the biggest drains

What to do with non-converting products:

• High spend, no conversions: Pause or exclude from campaigns
• Moderate spend, no conversions: Investigate—check pricing, availability, product page quality
• Low spend, no conversions: May need more data; monitor but don't act yet

Manually tracking wasted spend requires ongoing data exports and spreadsheet analysis. Tools with dedicated wasted spend tracking—like the wasted spend tracker in SKU Analyzer—automate this process and surface budget-draining products automatically.

2. Double Down on Top Performers

The Pareto principle applies strongly to Shopping campaigns: typically 20% of products drive 80% of revenue. Identifying and scaling these winners is often the highest-impact optimization.

How to find top performers:

1. Sort products by revenue (or conversion value)
2. Calculate cumulative percentage
3. Identify products contributing to the first 80%

Actions for top performers:

• Increase bids to capture more impression share
• Ensure adequate budget (check "Limited by budget" status)
• Prioritize inventory management to avoid stockouts
• Test higher positions with bid increases

3. Fix Your Pricing

Price competitiveness directly impacts Shopping ROAS. Products priced significantly above competitors will struggle to convert, dragging down ROAS regardless of other optimizations.

Google Merchant Center's Price Competitiveness report shows how your prices compare to market benchmarks. Use this data to categorize products:

• Significantly overpriced (>15% above benchmark): High priority for price reduction or reduced ad spend
• Slightly overpriced (5-15%): Monitor conversion rates; consider adjustment
• Competitive (-5% to +5%): Focus optimization elsewhere
• Underpriced (>5% below): Opportunity to increase prices and improve margins

4. Improve Product Titles and Images

Your product listing quality affects both CTR and conversion rate, both of which impact ROAS. According to Google's product data specification:

Title optimization:

• Include brand, product name, and key attributes
• Front-load the most important information
• Use relevant keywords naturally (not keyword stuffing)
• Keep under 150 characters for full display

Image optimization:

• Use high-resolution images (at least 800x800 pixels)
• Show the product clearly on a white or neutral background
• Include multiple images to showcase different angles
• Avoid watermarks, logos, or promotional text on images

5. Segment by Performance with Custom Labels

Custom labels let you segment products in ways that matter for bidding. Create labels based on:

• Margin tier: High, Medium, Low margin products
• ROAS performance: Stars, Solid, Underperformers
• Seasonality: Evergreen, Seasonal, Clearance
• Strategic priority: Hero products, New arrivals, Legacy

Then bid differently by segment. High-margin products can tolerate lower ROAS; seasonal items need aggressive bids during their window.

6. Optimize Your Bidding Strategy

The right bidding strategy depends on your data volume and goals. Google's Target ROAS bidding can be effective but requires setup:

Strategy	Best For	Requirements
Manual CPC	New campaigns, granular control	Time for management
Maximize Conversion Value	Scaling revenue, sufficient data	15+ conversions/month
Target ROAS	Maintaining efficiency while scaling	15+ conversions/month, clear target

Target ROAS tips:

• Start with a target 10-20% below your current ROAS
• Give the algorithm 2-3 weeks to learn before judging
• Avoid aggressive targets that limit reach too severely
• Use portfolio bidding to group similar products

7. Account for Conversion Lag

Google Ads attributes conversions to the click date, not the conversion date. This means recent data always looks worse than reality because conversions are still coming in. Understanding conversion lag in Google Ads is essential for accurate reporting.

Best practices:

• Wait at least 7 days after a period ends before analyzing it
• Compare complete weeks, not partial periods
• Use the "Time lag" report in Google Ads to understand your specific lag
• For high-consideration products, the lag may extend to 30+ days

ROAS Optimization Mistakes to Avoid

Even experienced advertisers make these mistakes when optimizing for ROAS:

Chasing Account-Level ROAS Instead of Product-Level

Optimizing for aggregate ROAS misses the real story. A product with 10x ROAS subsidizing one with 0.5x ROAS still averages out—but you're wasting money on the loser.

Setting Unrealistic Target ROAS

Setting an aggressive tROAS target (like 8x when your average is 4x) will severely limit your reach. The algorithm will only bid on the safest opportunities, reducing volume dramatically.

Ignoring Margin Differences Across Products

Treating all products with the same ROAS threshold is a mistake. A 3x ROAS on a 60% margin product is highly profitable; the same ROAS on a 20% margin product is a loss.

Making Changes Too Frequently

Smart Bidding algorithms need learning time. Making bid changes every few days based on small data samples creates noise and prevents optimization. Establish a weekly or bi-weekly optimization cadence.

Not Accounting for Assisted Conversions

ROAS typically uses last-click attribution. Products that assist conversions but don't get credit may be undervalued. Check the Attribution reports to understand the full picture and consider how brand-level analysis can reveal assisted conversion patterns across your portfolio.

Frequently Asked Questions

Conclusion

ROAS is the clearest indicator of Shopping campaign profitability, but only when analyzed correctly. The key takeaways:

• Calculate your break-even ROAS based on your actual margins, not industry benchmarks
• Analyze at the product level—campaign averages hide both opportunities and problems
• Eliminate wasted spend on non-converting products as your first optimization
• Scale top performers that are already proving themselves
• Account for conversion lag before making decisions on recent data

The advertisers who consistently improve Shopping ROAS are the ones with visibility into product-level performance. When you can see exactly which SKUs are profitable and which are draining budget, optimization becomes straightforward.