Services
Do you feel like you're spending huge amounts on your digital ads but don't know for certain what the real return and net profit you're achieving are? Do you track your campaigns on intuition, hoping the results will be positive, instead of steering by precise, confirmed numbers? This anxiety over lost numbers is the biggest challenge facing entrepreneurs in the fast-paced Saudi market.
Return on ad spend (calculating ROAS) and customer acquisition cost (CAC) are the financial compass of any digital business. They are not just metrics; they are the decisive judges of your marketing campaigns' profitability. Understanding these two metrics and calculating them accurately represents the difference between burning the budget and achieving sustainable growth.
This guide is a clear roadmap, presented to you by Bateel Tech Solutions, for calculating these indicators, analyzing them, and using them to make marketing decisions that boost profitability in the Saudi market. Our goal is for you to gain the desire to master the numbers, and to transform from a manager who guesses into a leader who relies on data.
Here is exactly what you will learn from this comprehensive guide:
Return on ad spend (ROAS) is the most important indicator for a marketing manager, because it tells you how effective every riyal you spend on ads is. It is the direct metric that answers the question: “How many riyals did I earn for every riyal I paid on advertising?” You can't talk about the profitability of marketing campaigns without a deep understanding of this metric.
To calculate ROAS, we use the following simple formula:
When a ROAS figure appears to you, you should understand it as a percentage or a multiplier. For example, if ROAS equals 5, this means you earned 5 riyals for every riyal you 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.
The professional tip from Bateel Tech – You must calculating ROAS “net” (Net ROAS). This requires subtracting the cost of goods sold (COGS) and direct operating costs from revenue. This metric is the only one that gives you a true picture of ad profitability.
| Criterion | ROAS (return on ad spend) | ROI (return on investment) |
| The goal | Measuring the effectiveness of a specific ad campaign. | Measuring the profitability of the total investment (operations + marketing + product). |
| The formula | Ad revenue / ad cost | (Net profit – investment cost) / investment cost |
| When is it used? | To evaluate individual marketing channels (Google Ads, Snapchat). | To evaluate the company's overall financial health and broader investment decisions. |
There is significant confusion between ROAS and ROI. Here is the fundamental difference:
Bateel Tech's advice: Use ROAS to evaluate a single ad channel or a single campaign, and adjust it daily or weekly. And use ROI to evaluate the viability of your business plan and your investment in marketing overall, to make strategic decisions.
What is the number you should target when calculating ROAS?
in e-commerce, a ROAS of 4:1 (400%) is considered an excellent starting point. This means you earn 4 riyals for every riyal you spend on advertising. But this number may change based on your profit margin.
A practical Saudi example:
Let's assume you have an online store selling luxury abayas, with an average abaya price of SAR 700 (and your profit margin is 50%, i.e. SAR 350).
If ROAS tells you about your ad's effectiveness, then customer acquisition cost (CAC) tells you about your business's sustainability. CAC is the total cost your company incurs to acquire one new customer. Companies that fail to track CAC accurately are the ones that suffer from financial losses invisible ones.
The basic formula for calculating CAC is:
Crucial notes from Bateel Tech: When you calculate CAC, you must be as comprehensive as possible. You must emphasize the necessity of including all of the following costs:
If you overlook any element, the CAC calculation will be fake, giving you a false impression of your campaigns' profitability.
The question is not “What is CAC?” but rather “Is my CAC good or bad?”
The decisive indicator for judging CAC is comparing it to Customer Lifetime Value (CLV). It should be CAC much lower than CLV to maintain financial safety and growth.
If CAC rises excessively, you are at risk of burning the budget. Here are 5 indicators that show CAC is dangerously high:
Reducing customer acquisition cost is not just about cutting the ad budget; it is comprehensive strategic work.
Targeting the right audience: Using AI data to identify customers with high CLV and excluding the segments that cost you more and only buy once.
To be a successful entrepreneur, you must turn the floating numbers into fixed key performance indicators (KPIs) that chart your path to success. Leading with data means your decisions (increasing a budget, stopping a campaign) are made for you by the dashboard.
Key performance indicators (KPIs) are the measurable goals you derive from calculating ROAS and CAC.
CLV (Customer Lifetime Value) is the metric of the total financial value a customer will provide to your company throughout their relationship with you. The relationship between CLV and CAC is the key to financial safety:
The successful manager is the one who sees everything in one place. Trying to calculating ROAS and CAC manually from multiple ad reports is a slow, error-prone process.
The solution lies in building a smart digital dashboard.
The tools needed: You can use tools such as Google Looker Studio or Power BI to gather data from Google Ads, Snapchat, and Shopify, and connect them together. These dashboards help the manager make quick decisions. For example, if you see that ROAS in a particular campaign dropped below 2:1, you can stop it immediately.
| Performance indicator (KPI) | Description | The purpose of the measurement |
| ROAS | The direct return from ads. | Evaluating the effectiveness of a single ad channel. |
| CAC | The total cost of acquiring a new customer. | Evaluating the efficiency of marketing and sales operations. |
| CLV | The total expected value of the customer. | Determining the maximum budget for CAC. |
| AOV | Average order value. | Working to increase it to raise ROAS without increasing spend. |
The Saudi market has unique characteristics that must be taken into account when Calculating ROAS and CAC in Saudi Arabia. Local laws, consumer habits, and the high cost of some ad channels make the matter 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 declared revenue from your store is SAR 1,000, the actual revenue before tax is SAR 869.5. This figure is what you should use in the formula for net ROAS .
This step ensures compliance with the requirements of the Zakat, Tax and Customs Authority (ZATCA) and gives you a true view of your profitability.
The numbers are the compass, but you need a map. Learn about a design guide for a professional tech company website that sells and converts customers benefit from these numbers in our next article.”
Costs vary significantly between local ad channels:
Example: If you sell beauty products, you'll find that the ROAS from Google Shopping ads may be higher than Snap Ads, but the latter gives you wider reach. You must set the budget on each platform based on the ROAS expected from each, not based on its total cost.
At Bateel Tech, we use our expertise in Calculating ROAS and CAC in Saudi Arabia to provide solutions that don't rely on “the click” alone.
4 tips to avoid burning the budget in Saudi ad channels:
You have now taken a big step toward controlling your numbers. You know how to calculate ROAS and CAC, and you understand the importance of linking them to key performance indicators (KPIs). This knowledge places you among the companies led by data.
But theoretical knowledge is not enough to rescue a failing ad campaign. The real challenge lies in applying these formulas to hundreds of customers in real time, in a changing environment like the Saudi market, and designing dashboards that let you see the actual profit at any moment.
This is where our role comes in at Bateel Tech Solutions. We don't tell you “calculate it yourself”; rather we say: “calculate it yourself, or let us build you a ready-made Dashboard.” Our team isn't just a marketing team, but an analytics and technology team. We specialize in connecting your stores and business management systems (such as Odoo) and your ad dashboards with smart designs for KPI Dashboard, giving you full control over calculating ROAS and CAC at the push of a button, and freeing your time to focus on growth strategies instead of complicated Excel spreadsheets.
To achieve the maximum return from every riyal, rely on our expertise in Marketing Packages for Saudi Startups , where we focus on reducing acquisition cost and raising profitability.“
There is no “magic” number that suits everyone, but the accepted industry benchmark 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 ROAS is above 2:1, this usually covers the direct and operating costs in most businesses.
The basic principle of the formula is the same, but in the services sector (B2B) the sales team costs (calls, meetings, commissions) are more prominent in the calculations, while in e-commerce (B2C) the focus is more on paid advertising and optimization costs.
The ideal CLV-to-CAC ratio is 3:1. This means every riyal you spend acquiring a customer returns at least three riyals to you throughout the customer's lifetime. Reaching this ratio signals that your business model is sustainable and primed for growth.
To ensure the accuracy of ROAS and CAC calculations, you must unify the data source, use a powerful analytics tool (such as Google Analytics 4), and correct the conversion tracking settings with high precision. Bateel Tech Solutions helps you set up these tools properly.
