Marginal ROAS
Marginal ROAS represents the return on investment for the *last* dollar spent. Unlike Average ROAS (total revenue / total spend), Marginal ROAS tells you the profitability of scaling up. If Marginal ROAS < 1.0, you are losing money on your scale-up, even if Average ROAS looks healthy.
The Short Version
What happens if I spend $1 more?
Visual Explanation
What Are Marginal Returns?
Your best channel eventually stops working. Understand diminishing returns.
Prerequisites
Average Lies, Marginal Tells Truth
You have a 5.0 Average ROAS. You double spend. Your total ROAS drops to 2.5.
Why? Because your *Marginal* ROAS on that new spend was likely near zero. You need to watch the Marginal metric to know when to stop.
How it works
Take the derivative of the Incrementality Curve at current spend
Or calculate: (New Revenue - Old Revenue) / (New Spend - Old Spend)
Compare to profitability target (e.g., Break-even ROAS)
Common Misconceptions
Optimizing based on Average ROAS (Leads to overspending)
Stopping when Marginal ROAS equals Average ROAS (You leave money on the table)
Ignoring margins (Marginal ROAS should cover COGS)
Frequently Asked Questions
QShould Marginal ROAS equal 1?
Ideally, you scale until Marginal ROAS equals your Break-Even point (profit margin). If margins are 50%, scale until Marginal ROAS is 2.0.
QIs Marginal ROAS volatile?
Yes, it is noisier than Average ROAS. That's why we use smoothed curves to estimate it.