Why a high ROAS is not automatically better – and what you really need to understand about Target ROAS.  

"We want to increase our ROAS." A sentence that comes up in almost every e-commerce setup. And at first glance, it makes perfect sense. However, in the context of Google Shopping or Performance Max campaigns, this thinking often leads one astray. Because what many underestimate: Once you activate a Target ROAS strategy in your campaigns, the entire allocation logic changes. 

What sounds efficient in theory often has a different effect in practice: 

• Decreasing impressions

• Fewer clicks

• Lower revenues

  … even though the ROAS mathematically looks "better".

 Because: Target ROAS is not a "performance booster" but a controlling bidding target that heavily depends on your data situation, the margin per product, and actual conversion behavior. And this is often ignored.

That's why you will learn in the following article:

• what Target ROAS really does (and what it doesn't),

• why blanket target values are almost always the wrong way to go,

• how to build smarter bidding logics with margins, price bands, and custom labels.

So at the end, you not only have a "nice" ROAS – but also more profit.

Setting Target ROAS in Google Ads

Once you define a Target ROAS for a shopping or PMAX campaign in Google Ads, you are telling the system: "Please only display my ads when the expected conversion justifies this revenue value."

This means specifically:

Google analyzes in real-time every single potential click – and calculates whether this click is likely to bring enough revenue to achieve your ROAS target.

If the click has too low revenue potential according to Google's forecast? → No bid.

If it looks good? → Google automatically increases the CPC to secure the click.

This logic leads Google to: 

• Increase CPCs for search queries with high conversion probability or strong purchase intentions (e.g., brand-related keywords, bottom-funnel signals)

• Decrease CPCs or not bid at all on generic terms or unclear purchase intent 

Target ROAS can strategically manage your campaign – or completely derail it if you set the levers incorrectly.

Target ROAS in Google Shopping: Why a blanket value can hinder your growth

A single ROAS value does not work for an entire range of products. Because: Not all products are equally profitable.

A high-priced niche product with a fat margin can run super profitably at 300% ROAS. A low-ticket bestseller with a thin margin may need 800% to break even at all. Other products are more about bringing in traffic and have strategic value, even if the ROAS initially lies "below target."

And what happens if you nevertheless specify a blanket ROAS value – e.g., 600% across all products?

• Google automatically suppresses everything that is predicted not to achieve this value.

• Your visibility decreases – even for products that actually perform well (but have slightly different margins).

• Revenue potentials get capped – in favor of pure mathematical efficiency.

Using Margins & Custom Labels for Intelligent Bidding in Google Shopping

If you want to use Target ROAS meaningfully, you need a product logic that is not based on gut feelings – but on hard numbers. The basis for this: margin.

And this is precisely where many advertisers miss potential. Because even though Google has long supported the attribute Cost of Goods Sold (COGS) in the product feed, it is rarely used. Yet it is a game-changer.

Why margins should be your actual decision-making basis

Not every product needs the same ROAS to be profitable.

What counts is: How much do you have left at the bottom line – after ad spend, purchase, logistics, etc.?

• A product with a 70% margin is already in the green area at ROAS 200%.

• A product with only a 10% margin? You might need ROAS 900% not to make a loss.

  
  

Implementation with Custom Labels & Price Bands

• Tools like Label Up help you exactly here: COGS & Margin are made directly available in the feed

• Products are automatically labeled according to margin logic (e.g., “40%+ Margin”, “Low Margin”, “Strategic”)

• ROAS target values are assigned per label group instead of blanket over the entire campaign

• Additional lever: price bands

  • Products under €50 usually perform differently than those over €300. Here too, you can target differently

  • Your assortment is not homogeneous, so your ROAS targeting shouldn't be either.

With margin-based custom labels, you finally bring economic intelligence into your campaigns. 

A too high Target ROAS can kill your revenues

An incorrectly set ROAS value can cost you more revenue than any bad creative test.

Especially in e-commerce, we experience it time and again: Shops define their desired ROAS with the motto "The higher, the better." So the Target ROAS is set to 700%, 800%, or even 1000% – in hopes of maximum profitability.

And what happens then? -Visibility gone. Clicks gone. Revenue gone.

If Google recognizes based on your historical campaign data that certain products cannot reach this target value, it will lower the CPC so much that you simply stop playing in the auction game. Products that previously brought in 80% of your revenue get excluded, and impression share goes down.  Your “top sellers” lose their performance base, and your campaign crashes, even though your ROAS has mathematically increased.

Setting the right Target ROAS

A good Target ROAS is not wishful thinking. It is based on data, history, and reality. If you simply specify any target value in your campaign, Google will quickly throttle you.

Google recommends: Use the historical metric "Conversion Value / Costs" as a basis. Look at what your campaign has actually achieved in the last few weeks and set your ROAS not above that, but slightly below or at the same level if you want stability.

3 Google Ads mistakes you must avoid: 

1. Setting ROAS without a data basis:

   If you start a new campaign and directly set a ROAS of 600%, Google lacks the signals → your campaign starts in blind flight.

   
   

2. Defining too high values from gut feeling:

   Sure, 800% sounds good – but if you've only achieved 450% so far, you will lose visibility.

   
   

3. Ignoring conversion delays:

   Depending on the attribution and tracking setup (Google Ads vs. GA4), conversions can only appear after days or weeks. Your actual ROAS values always lag behind somewhat.

Read more about the top 10 Google Shopping mistakes you should absolutely avoid here: Google Shopping Tips and Tricks

At a glance: Best practice for setting Target ROAS

• Start with a realistic value from your last 30 days

• Adjust ROAS targets only gradually

• Work with custom labels per margin or price band to optimize more distinctly

• Test new target values in separate campaigns or with portfolio strategies

  
  

Target ROAS in Google Ads: How often should you really change the target value?

Every change to the Target ROAS triggers a new learning phase. And that can take up to 2 weeks – during which your campaign may perform less well at first.

Rule of thumb: As seldom as possible, as thoughtfully as necessary.

• Do not change your Target ROAS more often than every 14 days

• Observe the effects over a longer period (at least 1-2 weeks)

• If you make a change, document it and do not change multiple things at once (otherwise, you won't know what had the effect)

 Google Ads campaigns with Target ROAS work with machine learning. The system needs: Reliable signals, time for evaluation, and stability

If you constantly tweak, you interrupt the learning process.

Conclusion: Target ROAS is not a performance hack, but a strategic tool

A high ROAS looks good in reporting. But if you sacrifice visibility, scaling, and revenue for it, you’ve gained nothing in e-commerce. Target ROAS is not a magic switch, but a sensitive control mechanism. If you use it correctly, you can grow more profitably, use your budget more efficiently, and scale your campaigns purposefully.

If you misuse it, you risk throttling your entire setup.

The most important learnings once again at a glance:

• ROAS needs context: A blanket target value does not work for a diversified range of products.

• Margin first: Work with real product data (COGS, price bands) and use custom labels for control.

• Data-based instead of wishful thinking: Set realistic target values based on history – not your revenue expectations.

• Avoid frequent changes: Give the algorithm time to learn and optimize your strategy.

  
  

If you need help optimizing your Google Ads – for example, in segmenting your feed by margin, price, or ROAS potential: Then let Labelizer from Label Up assist you.

You can read more about this here.