Revenue rankings and profit rankings rarely match. Heavy or bulky products, heavily discounted heroes and products with high return rates can sit at the top of sales and near the bottom of profit.
Share each order’s costs across its products by value, then compare each product’s share of revenue with its share of contribution. The gaps show where to change price, bundle or ad budget.
Formula
Product contribution = Net sales − Product cost − Share of shipping, fees, discounts and RTO
Margin from cost and price, or the price you need for a target margin, with tax handled properly.
Related terms
- Contribution margin (CM1, CM2, CM3)Contribution margin is the revenue left from a sale after the variable costs of…
- Attach rateAttach rate is the share of orders containing one product that also contain a…
- Gross marginGross margin is the share of the selling price left after the direct cost of the…
Where this comes up
Is your best seller losing money? How to measure product profitabilityRevenue rankings hide the products that lose money. How to build a product P&L that shares shipping, fees, discounts and RTO fairly, and what to do with the gaps it finds.Part of the growth marketing glossary by Shiva Sharma.