Marketing teams spend a lot of time optimizing for performance. What’s the right CPA? What’s the right ROAS target? How much should we spend? Those questions feel practical. They’re measurable. They give teams something concrete to anchor to. But they miss the real decision.
Budgets often start as a fixed amount of spend to optimize. That’s normal in less mature programs. But as more data becomes available, that approach should evolve.
Marketing spend is one of the primary ways a business deploys capital. When it isn’t treated as a capital allocation decision, teams make choices that don’t align with what that capital is supposed to return. As spend increases, the pattern is fairly consistent:
- Revenue increases.
- Efficiency declines.
- Contribution profit rises, then eventually falls.
- Each additional dollar becomes less productive than the one before it.
None of this is controversial. Most teams have seen it in their own data, even if they haven’t formalized it. The breakdown happens in how these dynamics translate into decisions.
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The same data supports multiple ‘correct’ answers
Consider sample data: as spend increases, performance follows a typical diminishing returns curve. Early dollars are highly efficient. Later dollars still drive growth, just at a lower rate. This is where I see many teams stop. But they miss two critical steps:
- Translating to marginal ROAS.
- Flowing through to contribution profit.
Without going beyond spend, revenue, and ROAS, it’s hard to be convinced to take any meaningful action from the data.
Even if you plot ROAS/iROAS, you can still look at the data too passively when it should spark an active discussion: where should we spend to?
The answer is everyone’s favorite: it depends. It depends on what you’re optimizing for. You must map out the impact on contribution profit and what’s happening at the margins of your spend.
If your goal is to maximize revenue
You would keep spending. In theory, you would spend forever.
In practice, no business actually does that. But directionally, if the goal is purely top-line growth, the answer is always more (in the first chart, the revenue line never goes down).
If your goal is to maximize profit
The answer looks very different. Let’s map out that table further:
In this example, contribution profit peaks at spend of around $6,000 per day. Every dollar up to that point is doing meaningful work for the business:
- Driving incremental revenue.
- Covering variable costs.
- Contributing profit.
Beyond that, revenue continues to grow, but less efficiently. Eventually, you are no longer adding to your bottom line. You are trading profit for additional revenue.
If your goal is to maximize revenue without becoming a drag on the P&L
There is a third option that often sits between the two. You might choose to spend up to around $18,000 per day. At that point:
- Revenue is still increasing
- Contribution profit has been fully reinvested
You are making a conscious decision to prioritize growth, while drawing a line at losing money.
Same curve, very different decisions
These are wildly different answers:
- ~$6,000/day → Maximize profit
- ~$18,000/day → Maximize revenue without becoming a drag on the P&L.
- “Spend forever” → Maximize revenue at all costs (not a real objective, but directionally what that implies).
I like to map out return curves with those extra columns because it forces a closer look than the typical “revenue is flattening” takeaway from a standard curve.
Where most teams go wrong
Most teams never explicitly make this choice because they never bring this data to the table with their finance stakeholders. Instead, they default to proxy metrics:
- A ROAS target that feels right.
- A CPA threshold that has been used historically.
- Platform-reported performance as a stand-in for business impact.
Those feel like the right optimization decisions. In reality, they’re implicit choices about where to sit on the curve without actually thinking about or measuring curves.
In some cases, teams underinvest. A high ROAS target (“to make sure we’re driving lots of revenue”) might cap spend at $3,000 to $4,000 per day, even though the business could profitably spend $6,000 or intentionally push to $18,000 depending on its goals.
No one says, “We’re choosing to leave growth on the table” when they set a high ROAS target, but that’s often the outcome.
In other cases, teams overinvest without realizing it. They anchor to average performance instead of thinking about what’s happening on the margins, so they might say: “We need to maintain a 2.0 ROAS (because we need every dollar to be profitable). Continue spending until blended performance hits that number.”
But by that point, the marginal dollar is likely doing something very different. If your average ROAS is 2.0, your marginal ROAS might be closer to 1.4. Early dollars are often highly profitable, especially in performance digital channels. Later dollars are doing far less work. You may already be past the point where profit from contributions is maximized.
If the goal is to maximize profit, the right question isn’t where average ROAS lands, it’s where marginal return meets your profitability threshold.
This is a capital allocation decision
This is where marketing and finance need to be aligned. It should be viewed like any other capital expenditure, with respect to trade-offs: Is there a better way to deploy this capital to maximize return?
For many businesses, especially consumer brands, marketing is one of the largest uses of capital. A meaningful portion of revenue gets reinvested into paid media and other growth initiatives.
That makes marketing one of the most important capital allocation levers in the business. Yet it’s often managed through platform metrics and isolated optimization decisions, disconnected from how finance thinks about returns, risk, and trade-offs.
That gap is where problems show up. Too much focus on efficiency leads to underinvestment, while too much focus on growth quietly erodes profitability. Both are symptoms of the same issue: the decision was never made explicitly.
More often than not, marketing didn’t earn a seat at the table because it didn’t bring the right data to it. What happens then?
Marketing gets handed a budget and told to spend it efficiently, drive growth, and do it profitably. It becomes a one-way street from finance to marketing, rather than a shared decision grounded in a clear understanding of what each additional dollar actually does for the business.
Marketers have the opportunity to change that. But it starts with bringing the right data to the table and using it to make better decisions about how that capital gets deployed.
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