Analify AI
Ecommerce glossary

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.

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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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