GLOSSARY
Contribution Margin
What is Contribution Margin?
DefinitionContribution margin is the revenue remaining after variable costs (COGS, fulfillment, payment fees), expressed as a percentage. It sets the real ceiling on how much CAC a brand can afford.
Formula
Contribution margin % = (Revenue − Variable costs) ÷ RevenueContribution margin is what converts marketing metrics into money: a $299/month GLP-1 program carrying roughly $150 of medication, pharmacy, clinician, and payment costs per patient runs a ~50% contribution margin, leaving about $150 a month to repay CAC before any profit exists. A supplement brand needs contribution margin above ~35% for a 3:1 LTV:CAC to survive overhead, which is why two brands with identical ROAS can sit on opposite sides of profitability. It also sets your break-even MER (1 ÷ contribution margin): at 40% margin, ads only add profit above a 2.5 MER.
Related terms
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