Digital marketing is a landscape of constant evolution, and demonstrating the impact of every dollar spent is non-negotiable. Yet, one recurring challenge leaves even seasoned marketers perplexed: a sudden drop in Return on Ad Spend (ROAS). While some teams shift focus to other metrics like Cost Per Acquisition (CPA), the underlying problem remains—reduced efficiency that needs immediate attention.

This guide explores a streamlined approach to identifying and resolving ROAS declines so your campaigns remain effective and aligned with broader business goals.

Step 1: Pause and Assess Before Acting. Don’t panic!

When a drop in ROAS occurs, avoid rushing into fixes. Knee-jerk reactions often amplify issues. Instead:

• Treat it as a learning opportunity: Problems signal areas for improvement and refinement in processes, such as setting up proactive alerts.

• Communicate with stakeholders: Keep teams informed about the issue and progress. Avoid sharing incomplete findings prematurely to prevent unnecessary confusion.

• Evaluate the broader trends: A slight daily dip might not warrant panic, but a prolonged or significant downturn does.

Begin by examining key KPIs over time to determine whether the issue is part of regular fluctuations or signals a deeper problem.

Step 2: Validate the Issue - Data or Reality?

Before taking action, confirm the problem’s authenticity. Is your ROAS truly declining, or are data discrepancies skewing the picture?

• Check for data inaccuracies: Common issues include overreported costs or underreported revenue due to delays or modeling errors. Cross-verify metrics with other sources. Check potential issues, such as API malfunctions or databases downtime

Establish whether this is a genuine ROAS drop or a byproduct of faulty data before proceeding to diagnostics.

Step 3: Identify the Root Cause - it’s time to slice and dice

Once confirmed, it’s time to “slice and dice” the data to identify the source. Break down your performance metrics across various dimensions and steps in the user journey.

Analyze Dimensions: Where’s the Problem?

Focus on segmentation to uncover trends:

• By operating system (e.g., Windows vs. macOS) or platform (e.g., iOS vs Android)

• By channel (e.g., search, social, or display ads)

• By geo (e.g., specific markets)

• By brand or product

• By campaign types

• Etc

This segmentation helps determine whether the drop is localized or widespread, guiding your next steps.

Break Down the Funnel: What’s Changed?

Decompose your funnel into key steps (Web | App):

• Click-through rates (CTR)

• Conversion rates (e.g., clicks to purchases | installs to purchases)

• Average order value (AOV) | Average revenue per user (ARPU)

• Costs (e.g., CPC, CPA)

Pinpoint which step shows the most pronounced drop. Often, the culprit isn’t across the board but isolated to a particular campaign, channel, or audience.

Step 4: Build Hypotheses and Take Targeted Action

Understanding the issue leads to actionable hypotheses.

• (Web) CPA increases for a specific product and channel: if CTR is constant, assess your landing pages performance for that specific product. Also look into your competition offerings and tweak your landing pages accordingly.

• (App) CPI increases on specific platforms: if CPI rises for iOS on Facebook, investigate ad placements, creative performance, or audience overlap. Adjust bidding strategies or refresh creatives to restore efficiency.

Always test changes methodically to confirm their effectiveness and avoid further disruptions.

Key Takeaways

• Start with validation: Verify whether the problem is genuine or data-related.

• Adopt a segmented approach: Use dimension and funnel analysis to isolate the issue.

• Act strategically: Form hypotheses based on evidence and execute targeted optimizations.

• A decline in ROAS is not the end—it’s an opportunity to refine strategies, improve efficiencies, and better allocate resources. By diagnosing first and acting decisively, you’ll turn setbacks into scalable solutions.

• Having a marketing analytics platform that enables you to explore data and test all your hypotheses quickly goes a long way.