Strong ROAS. How Much Contribution Remains?

01Strong ROAS is only the first signal

ROAS measures the revenue attributed to advertising for each unit of ad spend. Throughout this article, we analyse net revenue after promotions, on a consistent tax basis.

For example, VND 50,000 of Ads credited with VND 500,000 of net revenue produces a ROAS of 10×. This shows revenue efficiency, but leaves three questions unanswered:

• What contribution remains after all variable and marketing costs?
• How much revenue is genuinely additional because of the advertising?
• Will the next budget increase still earn an attractive return?

Two products with the same ROAS can generate very different contributions because their COGS, fees, Affiliate commissions and return rates differ. A strong ROAS warrants further analysis; it does not, by itself, justify a larger budget.

02Know what an order retains before spending more

Consider an illustrative order with VND 500,000 of net revenue:

After COGS of 35% and platform fees of 20.3%, the order retains VND 223,500 — 44.7% of net revenue, before Ads and Affiliate.

Assumed Affiliate commission of 10% consumes another VND 50,000, leaving VND 173,500 — 34.7% before Ads. Ads at 8–10% leaves VND 123,500–133,500 — 24.7–26.7% of net revenue.

This is contribution after the specified costs, not net profit. It still needs to cover omitted variable costs, fixed overhead and profit.

If management wants to retain 20% of net revenue, the provisional Ads ceiling is 34.7% − 20% = 14.7%: VND 73,500 per order, equivalent to approximately 6.80× ROAS on the same revenue basis.

Any omitted variable costs reduce that ceiling. This is a spending boundary for the chosen target, not an optimal budget: having room to spend does not mean the business should spend it all.

03Separate attributed revenue from incremental revenue

A customer seeing an ad before buying does not prove that the ad caused the entire purchase. The customer might already have intended to buy, or simply switched from another channel.

Estimate the net revenue genuinely added compared with a credible no-extra-spend baseline. Use suitable holdouts or controlled tests, while accounting for price, promotions, stock availability and seasonality.

Incremental contribution = incremental net revenue × contribution margin before Ads and Affiliate − incremental Ads − incremental Affiliate.

The margin must reflect the product mix and costs of the incremental revenue, not automatically the sample order. Deduct additional capacity or implementation costs separately if they are not already included.

If new sales displace sales from another SKU or channel, include the lost contribution. Do not count the same effect twice.

04Evaluate the next budget tranche, not just the average

Suppose the business considers an additional VND 10m of Ads. Assume the incremental revenue retains the illustrative 44.7% contribution margin before Ads and Affiliate, with Affiliate at 10% of net revenue:

Hypothetical scenarios, before any other incremental costs.

In scenario B, existing campaigns may remain profitable while the expansion reduces total contribution. The return on money already spent does not guarantee the return on money about to be spent.

Do not hold the 44.7% margin constant without evidence. New customers may buy smaller baskets, choose lower-margin SKUs or require deeper discounts. Recalculate the economics when these drivers change.

05Fix the driver before buying more traffic

Weaker performance does not always call for a different ad budget. First identify where the economics are breaking down:

A larger basket helps only if the additional contribution covers discounts, COGS and extra delivery costs.

For cost-per-click advertising, connect the financial target to traffic costs: maximum CPC = click-to-completed-order conversion rate × allowable Ads per order.

If 100 clicks generate two completed orders and allowable Ads is VND 50,000 per order, the budget for those clicks is VND 100,000 — or VND 1,000 per click.

Recalculate when conversion or allowable spend changes. Use data from the same campaign with enough time to capture orders, cancellations and returns.

06Agree the conditions for scaling, holding or cutting

A marketing proposal needs a test budget, an acceptable loss limit, a review date and conditions for releasing further funds.

A first-order loss may be an investment in acquiring customers. Validate repeat-purchase expectations through cumulative cohort contribution, after servicing and retention costs. The business must also be able to fund the wait for payback.

Brand investment may need a longer evaluation horizon, but still requires objectives, spending limits and learning milestones. Finance and Marketing should agree these conditions before spending, rather than debating them only after results disappoint.