Incremental ROAS (iROAS)

What It Is

iROAS is the causally incremental revenue generated per additional dollar of spend: iROAS = incremental revenue / incremental spend. In a geo-experiment it is read directly as the regression coefficient β₂ (β₂ = 3.1 → each $1 caused $3.1). It is the honest counterpart to blended ROAS (total revenue / total spend), which double-counts organic demand and systematically over-credits bottom-funnel channels.

Why It's the Allocation Metric

Blended ROAS can't guide spend because it doesn't isolate cause: a retargeting channel with blended ROAS 8× but iROAS 0.9× is destroying margin at the margin. The decision rule:

Move budget toward the channel with the highest marginal iROAS until marginal iROAS equalizes across channels (or reaches your target ROAS floor).

This is marginal economics: you optimize the next dollar, not the average dollar.

How It Applies to Marketing Factory

iROAS is the output that makes incrementality-testing actionable — it converts a causal estimate into a budget move, and it is the core input to marketing-budget-allocation. The factory should treat each channel's iROAS (with its confidence interval) as a maintained, periodically-re-measured estimate via geo-experiment or user holdouts, and reallocate when the intervals separate. It is the causal correction to marketing-attribution's credit-assignment.

Referenced from: incrementality-and-geo-experiments