Metrico glossary
Contribution Margin
Contribution margin is the revenue remaining after subtracting the variable costs included in the merchant's definition.
Definition
Contribution margin sits between gross revenue and net profit. The exact cost set varies by business and reporting model: product cost, payment fees, fulfillment, discounts, shipping subsidies, returns, and advertising can be included at different stages. Because definitions vary, the dashboard should state which costs are included before comparing contribution across products or periods.
Formula
Contribution margin = revenue − included variable costs
Example
$100 of revenue − $35 product cost − $10 variable fulfillment/payment costs = $55 contribution before advertising.
What to remember
- Contribution margin is not necessarily net profit.
- Use compatible currency and cost data.
- Contribution after ads requires defensibly mapped advertising spend when calculated at product level.