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Metrics
Contribution Margin
Revenue minus variable costs (COGS, shipping, payment processing, returns) expressed as a percentage. The true margin available to cover fixed costs and marketing spend. A product with 70% contribution margin can afford much higher CAC than one at 30%. Performance marketers should optimize toward contribution-margin-adjusted ROAS rather than raw ROAS to ensure every dollar of ad spend is generating actual profit, not just revenue.
Why it matters
It is the number that tells you whether a sale was worth making. Revenue-based ROAS targets are indifferent to whether the product earns anything.
In practice
Set channel targets on margin, not revenue. A 3x ROAS on a 20 percent margin product loses money; on 70 percent it does not.
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