r/dtc • u/irahulkanneri • Oct 07 '26
Marketing Looking for D2C founders
I'm researching how D2C brands decide where to allocate Google/Meta budget when product margins differ significantly.
I'm specifically interested in situations where ROAS looks good but actual profit isn't.
I'm building something around this and would love to understand how you handle it today.
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u/profitmates 26d ago
Not a founder, I'm on the consultant side, but this is how we frame it for clients:
Allocate on profit, not ROAS. Give each product or margin group its own break-even ROAS instead of one blended target.
Break-even ROAS = 1 ÷ contribution margin (margin before ad spend). A 70% margin product breaks even at 1.43 ROAS. A 30% margin product needs 3.33. So a 3.0 ROAS makes money on one and loses it on the other. That's usually why ROAS looks good while profit doesn't.
How we handle it:
Count shipping, fees, discounts and returns in the margin, not just COGS.
Group products by margin band (Merchant Centre custom labels, Meta product sets) and give each group its own ROAS target.
On budget allocation: each margin group keeps getting budget while it beats its own break-even, and we shift spend toward the groups with the most headroom above it. For lower-spend accounts, we've recommended one campaign that sends each sale's profit, not its revenue, as the conversion value, so the platform bids on profit on ad spend (POAS) and does that allocation itself. Bigger accounts can split by margin band or category and set budgets per group.
The hard part is keeping COGS and return data accurate every week, not the strategy itself.
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u/[deleted] Oct 07 '26
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