Welcome to another video / post where we cut through the fluff and get to what really matters in eCommerce marketing.
If you're here, you’re probably trying to figure out what POAS is, or whether it's even something you should be worrying about?
If it is?
What's more important for growth?
ROAS or POAS?
Good news—you’re in the right place.
Let’s break down what these metrics are, why they matter, and which one you should actually care about.
No bullshit, just straight to the point.
What the Hell is ROAS?
Alright, let’s start with the basics.
ROAS stands for Return on Ad Spend.
It’s a fancy way of saying, “How much money did I get back after spending on ads?”
For every rand you put into Facebook or Meta ads, ROAS tells you how many rand you got back.
Simple enough, right?
But don’t be fooled into thinking it’s the only number you need to know.
There’s more under the hood here, and if you miss it, you could be in for a rude awakening.
How to Calculate ROAS
Let’s not overcomplicate this.
You take the total revenue from your ad campaign and divide it by what you spent on that campaign.
So, let’s say you’ve got an eCommerce store that and you've spent close to R1 Million on advertising in 3 months like the image below.
If you generated R4.6M back then you just take the total revenue and divide it by the total spend
Pretty straightforward—your ROAS is 4.6x.
In other words, for every R1, you made R4.6 back.
Now, this is the part where you start feeling pretty good about yourself.
Who wouldn’t like those numbers?
But hold your horses—ROAS isn’t the whole story.
But Wait—There’s a Catch
Here’s where things get tricky.
ROAS doesn’t account for all the other costs you’ve got piling up—like the cost of goods, salaries, VAT, and all those other fun expenses.
It’s like looking at your paycheck before taxes—it might look great, but it’s not what you actually take home.
So, while a high ROAS might look impressive, it doesn’t necessarily mean your business is profitable.
That’s a mistake a lot of business owners make—focusing too much on ROAS and ignoring everything else.
ROAS is nice to know, but it’s not the be-all and end-all.
This is where POAS comes in, and trust me, you’re going to want to pay attention to this one.
Revenue Isn’t Everything, My Friend
Let’s get something straight—revenue alone won’t keep your business afloat.
Yeah, it’s cool to say you made R4.6 million in revenue, but if your expenses are also a R4.6 million, you’re just spinning your wheels.
That’s not how you build a sustainable business.
This is why you need to dig deeper than just ROAS.
Revenue is just one piece of the puzzle.
It’s like winning a battle but losing the war—short-term wins are nice, but long-term survival is the goal.
If your costs are eating up all your revenue, it’s time to rethink your strategy.
This is where POAS comes in—it gives you the full picture, not just the shiny part.
Enter POAS: The Real MVP
Now, let’s talk about POAS—Profit on Ad Spend.
This is where things get real.
POAS tells you how much profit you’re actually making after all the dust has settled.
Unlike ROAS, POAS factors in all the costs—COGS, VAT, salaries, the works—so you know what you’re actually taking home.
This is the metric that really matters if you want to build a profitable, sustainable business.
After all, it’s not about how much you make—it’s about how much you keep.
How to Calculate POAS
Alright, let’s break it down.
First, take your total revenue.
Then subtract the cost of goods sold.
Next, subtract all your other expenses—VAT, salaries, rent, you name it.
What you’re left with is your profit.
Now, take that profit and divide it by what you spent on ads.
For example, if you made R4.6 million rand in revenue, and your expenses where R3 million, then you're left with R1.6 million.
So, revenue (R4.6M) divided by expenses (R3M) = 1.5X profit as we can see below.
So, for R1 you spend on marketing, you’re getting R1.5 in profit.
That’s money in your pocket, not just revenue on paper.
Why POAS is the Real Deal
POAS gives you the full picture of how your business is really doing.
It’s not just about revenue; it’s about profit.
A high POAS means your business isn’t just making money—it’s keeping money, which is what really matters.
This is the metric that tells you if your marketing efforts are actually worth it.
With a solid POAS, you know you’re not just running on a treadmill—you’re actually moving forward.
It’s the difference between being busy and being productive.
How to Use POAS to Optimize Your Ad Spend
POAS is your best friend when it comes to figuring out which ads are worth the money.
If you’re running a campaign that has a high ROAS but a low POAS, it’s time to rethink your strategy.
Your goal is to maximize profit, not just revenue, and POAS helps you do that.
By focusing on POAS, you can make smarter decisions about where to put your ad dollars.
This isn’t about playing the volume game—it’s about getting the best return for your investment.
Tips to Boost Your POAS
Alright, now that you know POAS is the way to go, let’s talk about how to boost it.
Because, let’s be honest, who doesn’t want to keep more of their hard-earned money?
Negotiate Like a Pro
One of the easiest ways to improve your POAS is by lowering your cost of goods sold.
Negotiate better rates with your suppliers.
Every rand you save here is a rand that goes straight to your profit margin.
This might seem obvious, but you’d be surprised how many businesses overlook it.
Don’t just accept the first price your supplier gives you—haggle, negotiate, push for better terms.
If you can shave even a small percentage off your COGS, it can have a big impact on your bottom line.
Cut the Fat
It’s time to audit your expenses.
Look at everything—subscriptions, shipping costs, service contracts—and figure out where you can cut back.
Every little bit counts.
This is about being lean and mean—trimming the fat so that more of what you make stays in your pocket.
Go through your expenses with a fine-tooth comb.
Are you paying for tools you don’t use?
Is there a cheaper shipping option that won’t affect delivery times?
These are the questions you need to ask yourself.
Get Your Pricing Right
Your pricing strategy has a massive impact on your POAS.
If your prices are too low, your margins shrink.
But if they’re too high, you might scare off customers.
Find that sweet spot where you’re making sales and keeping a healthy profit margin.
Experiment with different strategies like bundling or value-based pricing to see what works best.
Pricing isn’t just about covering your costs—it’s about understanding your customers and what they’re willing to pay.
If you get this right, you’ll see your POAS start to climb.
Focus on High-Margin Products
Push the products that give you the most bang for your buck.
If a product has a high profit margin, it’s worth putting more ad spend behind it.
Low-margin products might look good on paper, but they won’t do much for your bottom line.
Think about it this way—would you rather sell ten low-margin products or five high-margin ones?
The answer should be obvious.
Focus your efforts on the products that are going to make you the most money with the least effort.
Rethink Your Ad Spend
Not all ad campaigns are created equal.
Regularly review your ad spend to make sure you’re putting your money where it counts.
If a campaign isn’t generating a solid POAS, it might be time to cut it and reallocate those funds to something that’s working better.
Use tools like Facebook Ads Manager to track what’s actually driving profit.
This isn’t about set-it-and-forget-it—you need to be actively managing and tweaking your campaigns to get the best results.
Leverage Your Best Customers
Don’t forget about your existing customers.
Focus on increasing their Lifetime Value (CLTV).
Loyal customers are gold—they’re more likely to make repeat purchases and drive your POAS up.
Consider loyalty programs or personalized offers to keep them coming back.
Remember, it’s cheaper to keep an existing customer than to acquire a new one.
And the more they buy, the better your POAS will be.
Optimize Your Sales Funnel
Your sales funnel plays a big role in your POAS.
If you’re losing potential customers at any stage of the funnel, you’re leaving money on the table.
Make sure your funnel is smooth and seamless from start to finish.
That means optimizing your landing pages, checkout process, and follow-up emails to convert as many visitors into customers as possible.
A well-optimized funnel not only increases your conversion rate but also improves your POAS by driving more profit from the same ad spend.
Focus on Customer Retention
Customer retention is another key factor in boosting your POAS.
The longer a customer stays with your brand, the more profitable they become.
Implement strategies to keep customers engaged and coming back for more.
Think beyond the first sale—consider how you can keep customers buying over and over again.
Whether it’s through email marketing, exclusive offers, or top-notch customer service, retention should be a top priority.
Why You Should Track Both ROAS and POAS
Alright, so we’ve established that POAS is critical, but that doesn’t mean you should ignore ROAS.
ROAS is still useful for understanding how well your ads are performing.
But, if you want the full picture, you need to track both ROAS and POAS.
By looking at them together, you can see if your marketing strategy is driving revenue and profit or just revenue.
For example, a high ROAS with a low POAS might mean you’re bringing in sales, but your costs are too high to make those sales worthwhile.
On the flip side, a lower ROAS with a high POAS could mean you’re making fewer sales, but they’re more profitable.
In other words, both metrics have their place, and together they give you a more complete picture of your business’s health.
Think Long-Term, Not Just Quick Wins
It’s easy to get caught up in short-term wins, especially when you see a high ROAS.
But remember, the goal isn’t just to make sales—it’s to build a profitable, sustainable business.
That’s where POAS comes in.
By focusing on profitability, you’re setting yourself up for long-term success.
This approach helps you build a sustainable business model that can weather market changes and continue to grow over time.
Think of it like planting a tree—ROAS might be the seed, but POAS is the water and sunlight that helps it grow strong and healthy over the years.
The Bottom Line: Which Metric Should You Focus On?
So, what’s the verdict?
Both ROAS and POAS are important, but if you’re serious about growing your eCommerce business, POAS should be your priority.
ROAS is great for understanding your ad performance, but POAS gives you the real story on profitability.
Track both, but let POAS guide your decisions.
It’s the metric that will help you build a business that’s not just surviving but thriving.
That’s all for today.
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Cheers!