Contribution margin
Contribution margin is revenue minus variable costs: what sales contribute toward fixed costs and profit. In ecommerce, variable costs usually include product cost, shipping, payment fees, returns and, at the last level, ad spend.
Formula
Contribution margin = Revenue − Variable costs · Contribution margin % = Contribution margin ÷ Revenue
Example
Revenue $10,000 − COGS $4,000 − shipping $800 − returns $700 = $4,500 (45%) before ads; after $2,500 ad spend = $2,000.
In Analify
Analify’s Blended Profit is a contribution-style number after ad spend. The Agent can break it down by product, campaign or channel and show which costs are included.
Questions
What are CM1, CM2 and CM3?
Common layers: CM1 after product cost, CM2 after fulfilment and shipping, CM3 after marketing. Companies define them differently, so always show the formula.
Why does contribution margin matter for ads?
Your break-even ROAS is 1 divided by contribution margin % before ads.
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