Shopify ROI vs ROAS: did your campaign pay back?

ROI and ROAS answer different questions

ROAS is revenue divided by ad spend. It tells you how hard the ads worked. ROI is profit divided by everything you spent. It tells you whether the money came back. A campaign can have a healthy ROAS and a negative ROI, because ROAS ignores the product, shipping, fees, refunds and creative that ROI counts.

• Use ROAS while a campaign runs, to compare ads and ad sets against a target you set beforehand. See the break-even ROAS guide for how to set that target.
• Use ROI when a campaign, launch, sale or influencer deal has finished, to decide whether to repeat it.

The formula

ROI = (revenue − total spent) ÷ total spent. A result of 100% means you doubled the money. A negative result means you lost money, and −20% means you lost a fifth of what you put in.

The only hard part is deciding what goes into total spent. If a cost left your account because of this campaign, it belongs in.

How to run it

1. Pick the dates and the products the decision covers, and keep them the same on both sides of the sum.
2. Get revenue from a Shopify orders export, after discounts and refunds. If you use the ad platform's figure instead, say so, and do not mix the two.
3. List the costs: ad spend, product cost for the units sold, shipping you paid, payment fees, and any creative, influencer or agency fees.
4. Open the Shopify ROI calculator. Put ads and inventory in the initial investment, the other costs in extra costs, and the revenue in revenue.
5. Read ROI and net profit. Run it again with a different scenario if you want to compare two campaigns.

Worked example

These figures are an example, not a real store. A $42 serum costs $9, shipping is $4.50 and the payment fee is $1.52. A campaign spends $500 and the ad account reports $840 in sales, which is 20 orders. Two orders were refunded ($84), and you paid $120 for creator content.

• ROAS in the ad account: $840 ÷ $500 = 1.68
• Initial investment: ads $500 + product $180 + shipping $90 = $770
• Extra costs: fees $30.40 + creator content $120 = $150.40
• Revenue after refunds: $840 − $84 = $756
• Net profit: $756 − $920.40 = −$164.40
• ROI: −$164.40 ÷ $920.40 = −17.9%

The dashboard says 1.68. The books say you lost about 18 cents on every dollar. Without the refunds and the creator fee, the same campaign makes $39.60, an ROI of about 5%. This is why a ROAS only a little over break-even is not a green light.

What belongs in total spent

Use this list when you fill in the calculator. A cost belongs in if it would not have been paid without the campaign.

• Ad spend for the campaign and dates in question.
• Product cost for the units sold, not for stock still on the shelf.
• Shipping and packaging you paid on those orders, and the return label on the ones that came back.
• Payment fees on the orders, including on refunded ones if the processor kept the fee.
• Creative: creator fees, freelance editors, agency retainers for the period, and stock footage or music licences.
• Discounts you funded, if they are not already out of revenue.

Leave out costs you pay whatever you sell, such as your Shopify plan, unless you want the answer to be the profit of the whole store for the period instead of the campaign.

Comparing two campaigns

ROI is a percentage, so it can favour a small campaign over a large one. This example uses invented figures. Campaign A spends $920 in total and brings in $1,010. Campaign B spends $1,400 and brings in $1,610.

• Campaign A: profit $90, ROI 9.8%
• Campaign B: profit $210, ROI 15.0%

B wins on both measures. Now suppose B had cost $1,500 to bring in the same $1,610. Its ROI would fall to 7.3%, below A's 9.8%, yet it would still make $110, more than A's $90. Which is better then? It depends on what limits you. If cash is the limit, the higher percentage uses it better. If the limit is how many good campaigns you can find, the larger profit matters more. Look at both numbers before you decide.

Other ways to use ROI

• Compare two campaigns. Use the same cost list for both and compare the two percentages with each other. Do not compare either against a number from social media.
• Judge a product launch. Put the sample units, photos and landing page work in investment.
• Judge an influencer deal. Include the fee, the free product and the discount code the audience used.
• Review a slow month. Run total spend against total revenue to see where the money went.

If a lot of the revenue came from returning customers or will come from a customer's later orders, ROI on the first order undersells it. Check the lifetime value guide before you cut a campaign that brings in repeat buyers.

When to measure

ROI computed too early is misleading. Orders can arrive days after the click, refunds arrive weeks after the order, and an influencer's code keeps being used after the post. A reasonable approach is to wait until the refund window for the product has passed before you call a campaign final, and to note the date you measured. For a quick read while the campaign is still running, use ROAS against a break-even target. For the decision about whether to repeat the campaign, wait for the data.

Common mistakes

• Leaving out refunds. Revenue should be what you kept.
• Leaving out creative and agency costs. They are often the difference between a small gain and a loss.
• Mixing time windows. Orders from last week's ads do not belong against this week's spend.
• Calling ROI "return on ad spend". They are two numbers. Write which one you quote.
• Chasing a universal target. A positive ROI after every cost is the baseline. Anything above that is a matter of how much risk and cash tie-up you accept.

What to check next

If ROI is negative, find which line is too big before you cut spend. Work out what each sale keeps in the margin guide. If margin is fine but conversion is the problem, run the landing page through the Shopify CRO Audit.

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