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    Framework

    Performance Max Commercial Framework

    Move beyond ROAS targets. This framework helps you evaluate Performance Max based on what actually matters to your business.

    The Problem with ROAS

    ROAS is a ratio, not a profit figure. A 5x ROAS on £10,000 spend is very different from 5x on £100,000 spend. Performance Max often optimises for the metric, not the outcome.

    This framework shifts focus to contribution margin, what's left after product costs, ad spend, and variable costs.

    Step 1: Calculate Your Breakeven ROAS

    Breakeven ROAS = 1 / (1 - (COGS% + Variable%))

    Example: If your product costs 40% of revenue and variable costs (shipping, payment fees) are 15%, your breakeven ROAS is:

    1 / (1 - 0.55) = 2.22x ROAS

    Any ROAS below this means you're losing money on the ad spend.

    Step 2: Define Your Target Contribution

    Decide what contribution margin you need from paid acquisition. This should factor in:

    • Fixed overheads to cover
    • Desired profit margin
    • Customer lifetime value (if applicable)
    • Cash flow requirements

    A typical healthy ecommerce business needs 15-25% contribution after ad spend to remain profitable.

    Step 3: Set Asset Group Targets

    Not all products are created equal. Segment your Performance Max asset groups by margin tier:

    High Margin Products (60%+)Target: 3-4x ROAS
    Medium Margin Products (40-60%)Target: 4-5x ROAS
    Low Margin Products (<40%)Target: 6x+ ROAS

    Step 4: Monitor & Adjust

    Weekly, calculate actual contribution margin from Performance Max:

    Contribution = Revenue - COGS - Variable Costs - Ad Spend

    If contribution is positive and growing, scale. If not, diagnose whether it's a spend efficiency or product mix issue.

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