New Customer ROAS Analysis for eCommerce Brands

Chances are you're dumping money into ads, and everyone's telling you to watch your ROAS. 

But regular ROAS? That's only telling you part of the story. 

What you also need to keep track of is New Customer ROAS (NC ROAS).

Think about it - if you're spending $10K on ads and getting $20K in revenue, that looks great on paper, right? 

But what if I told you that $15K of that revenue came from existing customers who would've bought anyway through your email campaigns? 

Suddenly that ad spend doesn't look so hot, does it?

Why Should You Care?

Most of your ad spend is supposed to be bringing in fresh blood (aka new customers). 

Your existing customers? You've got email and SMS for that, and we all know those marketing channels cost way less than paid ads.

But here's where it gets interesting - and a bit messy. 

Sure, you can't perfectly control who sees your ads. Your existing customers will stumble across them, and sometimes they'll buy because of an ad instead of your latest email blast. 

That's just how it works in the real world.

The question is: are you cool with throwing money at expensive ad platforms when you could be getting similar results from practically free channels?

Let's dig into how this actually works...

How to Calculate New Customer ROAS

Here's the simple math: take all the revenue from new customers (just the ones buying from your direct-to-consumer channel like Shopify) and divide it by your total ad spend. Boom - that's your NC ROAS.

But wait, where do you get these numbers?

Your total ad spend? That's easy - grab it from your accounting platform like QuickBooks Online. 

But new customer revenue? That's where it gets tricky. QBO won't break that down for you.

You'll need to pull that data from:

• Your Shopify dashboard
• Triple Whale (bonus: they'll give you both numbers in one place)

What Numbers Should You Expect?

Most brands see NC ROAS somewhere between 0.5X and 2.5X.

"But wait," you're thinking, "anything below 1X means I'm losing money!"

You're not wrong, but here's why some brands do it anyway:

• They're VC-backed and playing the long game
• They're new and still figuring shit out
• They've got insane customer retention (looking at you, subscription brands)

That said, here's what you really want to be thinking about...

First-Order Profitability: The Holy Grail

Here's what you should really be aiming for: first-order profitability. 

In plain English? Making money on the first sale to a new customer.

Let's break down what that looks like:

1. Take your new customer revenue
2. Subtract your COGS (cost of goods)
3. Subtract shipping costs
4. Subtract any other variable expenses
5. Finally, subtract your ad spend

If you're at zero or better after all that? You're in a sweet spot. 

Why? 

Because everything that comes after - repeat purchases, word of mouth, lifetime value - that's all gravy.

Think about it: if you're profitable on the first order, you can keep scaling. 

Just keep pumping money into that ad machine, and as long as you maintain those margins, you're golden. 

It's like having a money printer that actually works.

Monthly Performance: What to Watch For

Now, you'd think NC ROAS would be pretty stable month over month, right? Well, yes and no. 

Here's when things get weird:

Black Friday Chaos

During big shopping events, your ad spend might shoot through the roof. Your NC ROAS might look different here, but that's normal. 

Everyone's spending more to capture that holiday cash.

The Organic Factor

Here's where it gets really interesting. Let's say you're killing it on TikTok organically. 

Your new customer revenue isn't just coming from ads anymore - it's flowing in from your viral posts too.

Think about it this way: if you're a brand new brand and ads are your only marketing channel, there's a pretty straightforward correlation - more ad spend equals more new customer revenue. 

Turn off the ads, and new customers disappear.

But once you've got strong organic game? That's a whole different story. 

You might slash your ad spend in January, but your new customer revenue doesn't tank because your TikTok is popping off. 

In fact, your NC ROAS might look artificially amazing because you're spending $1 on ads but getting $10,000 in new customer revenue from organic channels.

The stronger your organic game, the less direct correlation you'll see between ad spend and new customer revenue. 

This isn't a bad thing - it's actually a sign you're building a sustainable brand.

What This All Means for Your Brand

At the end of the day, here's what you need to remember about NC ROAS:

1. If you're not tracking new customer revenue separately from total revenue your ad spend might look efficient on paper, but you could be paying to advertise to people who would've bought anyway.
2. Being profitable on first orders isn't just a nice-to-have - it's your ticket to sustainable growth. When you can make money on that first purchase, scaling becomes a whole lot easier. You're not playing the "we'll make it up in lifetime value" game anymore.

Even if your NC ROAS isn't perfect right now, knowing your numbers is half the battle. You can't fix what you don't measure.

What To Do Next

If you're looking at your NC ROAS and:

• It's below 1X: Don't panic. Look at your customer lifetime value and retention rates. If they're solid, you might be okay running at a loss upfront. But have a plan to get to profitability.
• It's above 2.5X: Nice work, but don't get cocky. You might actually have room to spend more on acquisition. Could you scale up without tanking your efficiency?
• You can't calculate it at all: Drop everything and set up proper tracking. Like, right now. You need to know these numbers.

Remember: There's no perfect NC ROAS number that works for every brand. 

But understanding this metric and how it plays with your other numbers? That's what separates the brands that scale profitably from the ones that flame out.

You also need to keep your eyes on:

• Customer acquisition costs by channel
• Inventory efficiency
• Customer lifetime value
• Return rates
• Ad performance
• And a whole bunch of other metrics that tell your complete story

But here's the thing - if you can't see how your channels are performing individually, you're missing critical insights about where your business is headed and why.

Want the complete playbook?

This is just scratching the surface. If you're ready to master ALL the metrics that matter for your ecommerce business, grab our Ultimate Ecommerce Metrics Playbook.

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Inside you'll find:

• The exact dashboards we use with 7-figure brands
• Channel-specific KPI targets
• Custom tracking templates
• And way more than we could fit in this post

Stop guessing. Start knowing. Get the playbook and take control of your numbers.