A product P&L that stops at contribution hides the products that only sell because they are heavily advertised. Allocation closes the gap by mapping each campaign, ad set, ad or ad group to the product it promotes.
Shopping and Performance Max report spend by product, so they allocate themselves. Everything else needs a mapping: by name, by landing page, or by hand. Brand and store-wide campaigns are kept apart rather than forced onto a product.
Formula
Profit after ads = Product contribution − Ad spend mapped to the product
Example
A moisturiser earns ₹1.2 lakh contribution a month and its campaigns spend ₹1.4 lakh: it loses ₹20,000 a month after ads, despite a healthy margin.
The minimum ROAS and maximum CAC your unit economics can afford, with a full contribution margin waterfall.
Related terms
- Product profitabilityProduct profitability is the contribution each product earns after its own cost…
- Contribution margin (CM1, CM2, CM3)Contribution margin is the revenue left from a sale after the variable costs of…
- Break-even ROASBreak-even ROAS is the return on ad spend at which an order covers its variable…
Part of the growth marketing glossary by Shiva Sharma.