Muze AIDefinition
Contribution margin is what is left from revenue after every cost that varies with the sale: product cost, shipping, packaging, payment fees and, when you include it, advertising. It is the money actually available to cover fixed costs and profit. Contribution margin, not ROAS, is what tells you whether one more order left you better off.
How it is calculated
Contribution margin = Revenue - Variable costs
What to know
Operators usually stack the definition: contribution margin after product and fulfilment costs, then again after ad spend. The second version is the one that matters for media buying, because it answers whether the campaign added profit or only added volume.
It is also the figure that reconciles a healthy dashboard with an unhealthy bank account. A campaign can hold its ROAS target all month while contribution margin falls, if discounting, shipping subsidies or return rates moved underneath it.
Related terms
Track this across every platform at once
Muze reads Contribution margin and everything around it straight from your Meta, Google, Amazon and Shopify accounts, inside ChatGPT or Claude. Free to start.
See how Muze works