Skip to content
Glossary / Money metrics

Contribution margin.

Short answer

Contribution margin is what an order leaves after the costs that come with it: product cost, shipping, payment fees and returns. It is the money available to pay for ads, fixed costs and profit.

Also called: contribution per order, CM

The formula

Contribution = revenue - COGS - shipping - fees - returns
Contribution margin % = contribution / revenue

A Kestrel & Vane order is $120, with $42 product cost, $9 shipping, $3.60 payment fees and $6 of expected returns. Contribution is 120 - 42 - 9 - 3.60 - 6 = $59.40, a 49.5% contribution margin. That $59.40 is the most one order can pay for ads before it starts losing money.

Why it matters

Gross margin only subtracts product cost, so it overstates what you can spend on ads. Contribution margin is the honest number behind break-even ROAS, max CPA and POAS. Two products at the same price can leave very different contribution, which is why scaling the wrong one can lose money at a ROAS that looks fine.

How to improve it

Use real numbers per order, not estimates: actual shipping by zone, real fee rates and return rates by product. Recalculate after any price or supplier change. Then raise contribution with bundles, shipping thresholds or better supplier terms before you push more ad spend.

Contribution margin in Fovea

Fovea shows Meta spend and ROAS next to each creative you link, all-time and as a daily trend. Pair that with your own contribution math to see which creatives clear your line.

See Winners →

Questions, answered.

What is the difference between gross margin and contribution margin?+

Gross margin subtracts only the cost of goods. Contribution margin also subtracts shipping, fees, returns and other per-order costs, so it is lower and closer to what you really keep.

Should ad spend be part of contribution margin?+

Teams split on this. Keep a contribution figure before ads to set your break-even ROAS, and a second one after ads to see real profit per order.

Stop defining it.
Start seeing it.

Fovea tags every hook, angle and transcript on upload and keeps hook rate, hold rate and ROAS beside each linked creative.

Start free
  • 14-day free trial
  • No card
  • No ad-spend caps