Marketing Economics
ROAS tells one story. ROMI tells the truth.
One number measures the ads. The other measures the whole program. Owners need both.
The two definitions
ROAS is narrow. ROMI is whole.
ROAS = revenue from ads divided by ad spend. It ignores agency fees, content, software, your team’s time.
ROMI = revenue from all marketing divided by total marketing investment. Ad spend plus agency fees plus tools plus content plus the labor it took to run it.
Why ROAS lies
8x ROAS sounds great until you add the fee.
Say you spend $1,500 on Google Ads and book $12,000 in tree work. That’s an 8x ROAS. Looks like a winner.
Now add the $3,000 agency fee and $300 in software. Total marketing investment is $4,800. Same $12,000 in revenue divided by $4,800 = 2.5x ROMI. Still profitable, but a very different conversation.
How to use them
Two numbers, two jobs.
- 01
ROAS tells you if the ads are working
Use it to judge the ad account itself: keywords, creative, bidding. If ROAS is bad, fix the campaign.
- 02
ROMI tells you if the program is profitable
Use it to judge the entire marketing line on your P&L. If ROMI is bad, the math on the whole engagement is off.
- 03
Below 2x ROMI is a red flag
In home services, every dollar of marketing should return at least two. Below that, you’re paying to play, not paying to grow.
The bottom line
If the agency only shows you ROAS, you’re missing half the picture.
Ask for ROMI. Then judge the program on what it actually costs you, fees and all.