Do you feel like you’re spending huge sums on your digital advertising but don’t know for certain what the real return and net profit are? Are you managing your campaigns by intuition, hoping for positive results, instead of being driven by precise, confirmed metrics? This feeling of anxiety from lost figures is the biggest challenge facing entrepreneurs in the fast-paced Saudi market.
Return On Ad Spend (ROAS) and Customer Acquisition Cost (CAC) :
are the financial compass for any digital business. They are not just metrics; they are the ultimate judges of your marketing campaigns’ profitability. Understanding and accurately calculating these two metrics is the difference between burning budget and achieving sustainable growth.
This guide, presented by Bateel Tech Solutions, is a clear roadmap for calculating, analyzing, and utilizing these indicators to make marketing decisions that boost profitability in the Saudi market. Our goal is for you to gain a love for controlling the numbers, transforming you from a guessing manager into a data-driven leader.
Here is what you will learn specifically from this comprehensive guide :
Return On Ad Spend (ROAS) is the most critical indicator for a marketing manager because it tells you how effective every Riyal you spend on ads is. It’s the direct metric that answers the question: “How many Riyals did I earn for every Riyal I paid for advertising?” You cannot talk about campaign profitability without a deep understanding of this metric.
To calculate ROAS, we use the following simple formula:
When an ROAS figure appears, you should understand it as a percentage or a multiplier. For example, if ROAS equals 5, it means you earned 5 Riyals for every 1 Riyal spent.
The Common Mistake: Many believe that ROAS = 5 means they achieved a net profit of 4 Riyals. This is wrong. Revenue does not equal profit.
Professional Advice from Bateel Tech: You must calculate the “Net ROAS.” This requires subtracting the Cost of Goods Sold (COGS) and Direct Operating Costs from the Revenue. This is the only metric that gives you a true picture of advertising profitability.
| Metric | ROAS (Return On Ad Spend) | ROI (Return On Investment) |
| Goal | Measures the effectiveness of a specific ad campaign. | Measures the profitability of the total investment (operations + marketing + product). |
| Formula | ||
| When is it Used? | To evaluate individual marketing channels (Google Ads, Snapchat) daily or weekly. | To assess the general financial health of the company and broader investment decisions annually. |
There is significant confusion between ROAS and ROI. Here is the fundamental difference :
Bateel Tech Tip : Use ROAS to evaluate a single advertising channel or campaign and adjust it daily or weekly. Use ROI to evaluate the feasibility of your overall business plan and marketing investment to make strategic decisions.
What is the number you should target when calculating ROAS?
In e-commerce, an ROAS of 4:1 (400%) is considered an excellent starting point. This means you earn 4 Riyals for every 1 Riyal you spend on ads. However, this number may change based on your profit margin.
Practical Saudi Example :
Suppose you have an e-commerce store selling luxury Abayas, and the average price per Abaya is 700 SAR (with a 50% profit margin, meaning 350 SAR profit).
Here, you achieved a return of 4 Riyals for every Riyal spent. But to know the Net Profit, you must subtract the Cost of Goods Sold (20,000 SAR) from the revenue.
If ROAS tells you about the effectiveness of your ad, then Customer Acquisition Cost (CAC) tells you about the sustainability of your business. CAC is the total cost incurred by your company to acquire one new customer. Companies that fail to track CAC accurately are the ones that suffer from invisible financial losses.
The basic formula for calculating CAC is:
Crucial Notes from Bateel Tech: When calculating CAC, you must be as comprehensive as possible. It is essential to include all of the following costs :
If you omit any element, the CAC calculation will be falsified, giving you a misleading impression of your campaign profitability.
The question isn’t “What is my CAC?” but “Is my CAC good or bad?“
The decisive indicator for judging CAC is comparing it to the Customer Lifetime Value (CLV). CAC must be significantly lower than CLV to maintain financial security and growth.
If CAC rises excessively, you are in danger of burning through your budget. Here are 5 indicators of dangerous CAC elevation :
Lowering Customer Acquisition Cost is not just about reducing the ad budget; it is a comprehensive strategic effort.
To be a successful entrepreneur, you must convert floating numbers into fixed Key Performance Indicators (KPIs) that define your path to success. Data-driven leadership means your decisions (increasing budget, stopping a campaign) are made by the dashboard on your behalf.
KPIs are the measurable goals you derive from your ROAS and CAC calculations.
Practical Example: Instead of saying, “We want more sales,” you say: “We must ensure our CAC does not exceed 100 SAR this month,” or “Our average daily ROAS must be at least 3.5:1.” These are clear, smart goals for the marketing team.
Converting these metrics into goals allows you to measure campaign performance daily and adjust before it’s too late.
CLV (Customer Lifetime Value) is the measure of the total financial value a customer will provide to your company over the entire period of your relationship with them. The relationship between CLV and CAC is the key to financial security:
The Golden Rule: If , you are in a healthy and highly profitable financial position. This means that every Riyal you spend acquiring a customer returns to you with at least three Riyals over the customer’s lifetime.
If the ratio is 1:1 or less, you are losing money on every new customer you acquire. The solution here is either to lower the CAC or increase the CLV (by encouraging repeat purchases or upselling).
A successful manager is one who sees everything in one place. Trying to manually calculate ROAS and CAC from multiple advertising reports is slow and error-prone.
The solution lies in building a Smart Digital Dashboard.
Necessary Tools: You can use tools like Google Looker Studio or Power BI to collect data from Google Ads, Snapchat, Shopify, and connect them. These dashboards help the manager make quick decisions. For example, if you see that the ROAS in a particular campaign has dropped below 2:1, you can stop it immediately.
| KPI | Description | Measurement Goal |
| ROAS | Direct return from ads. | Evaluating the effectiveness of a single advertising channel. |
| CAC | Total cost to bring in a new customer. | Evaluating the efficiency of marketing and sales operations. |
| CLV | Total expected value of a customer. | Determining the maximum budget for CAC. |
| AOV | Average Order Value. | Working to increase it to raise ROAS without increasing spending. |
The Saudi market is characterized by unique features that must be considered when calculating Saudi ROAS and CAC. Local regulations, consumer habits, and the high cost of some advertising channels make the process more complex and require specialized expertise.
This is a crucial point that many overlook when calculating ROAS in the Kingdom:
Saudi companies must deduct the Value Added Tax (VAT 15%) when calculating the actual revenue for ROAS. For example, if the reported revenue from your store is 1,000 SAR, the actual revenue before tax is 869.5 SAR. This is the number you must use in the Net ROAS formula.
This step ensures compliance with the requirements of the Zakat, Tax and Customs Authority (ZATCA) and gives you a true vision of your profitability.
Costs vary significantly between local advertising channels:
Example: If you sell beauty products, you may find that the ROAS from Google Shopping ads is higher than Snap Ads, but the latter gives you wider reach. You must set the budget on each platform based on the expected ROAS for each, not based on their total cost.
At Bateel, we use our expertise in calculating Saudi ROAS and CAC to provide solutions that don’t just rely on a “click.”
4 Tips to Avoid Budget Burn in Saudi Advertising Channels:
You have now taken a huge step towards controlling your figures. You know how to calculate ROAS and CAC, and you understand the importance of linking them to Key Performance Indicators (KPIs). This knowledge puts you in the ranks of data-driven companies.
But theoretical knowledge is not enough to save a failing ad campaign. The real challenge lies in applying these equations to hundreds of customers in real-time, in a dynamic environment like the Saudi market, and designing dashboards that allow you to see the actual profit at any moment.
This is where our role at Bateel Tech Solutions comes in. We don’t say, “Calculate it yourself,” but rather, “Calculate it yourself, or let us create a ready-made Dashboard for you.” Our team is not just a marketing team; it’s an analytics and technology team. We specialize in connecting your stores, business management systems (like Odoo), and ad dashboards with smart KPI Dashboard designs, giving you complete control over ROAS and CAC with a single click, freeing your time to focus on growth strategies instead of complex Excel spreadsheets.
In conclusion, mastering the calculation of ROAS and Customer Acquisition Cost (CAC) represents the backbone of any sustainable business growth. These indicators are not just accounting figures; they are the language of communication between your investments and your success.
Start applying these formulas today, and transform raw data into smart, profitable marketing decisions.
There is no “magic number” that fits everyone, but the acceptable industry standard for e-commerce is often 3:1 or 4:1. You must calculate your operating costs and profit margin to determine your break-even point. If the ROAS calculation is higher than 2:1, this usually covers direct and operational costs in most businesses.
The basic principle of the formula is the same, but in the services sector (B2B), the costs of the sales team (calls, meetings, commissions) are more prominent in the calculations, while in e-commerce (B2C), the focus is more on paid advertising costs and optimization.
The ideal value for CLV to CAC is 3:1. This means that every Riyal you spend acquiring a customer returns to you with at least three Riyals over the customer’s lifetime. Reaching this ratio indicates that your business model is sustainable and poised for growth.
To ensure the accuracy of ROAS and CAC, you must standardize the data source, use a powerful analysis tool (like Google Analytics 4), and precisely correct the conversion tracking settings. Bateel Tech Solutions helps you set up these tools correctly.
