It is the same number as CM3: the cash each period’s orders leave to cover fixed costs. Unlike ROAS, it cannot look healthy while the business loses money, because every variable cost is in it.
Track it daily alongside revenue. When revenue rises and profit after marketing falls, the growth is being bought, usually through rising ad costs, deeper discounts or more cash-on-delivery returns.
Formula
Profit after marketing = Contribution before marketing − Marketing spend
Example
Contribution before marketing ₹4,80,000 and ad spend ₹3,90,000 leave ₹90,000 of profit after marketing.
CM1, CM2, CM3 and EBITDA per order and per month, with RTO, COD, channel comparison and a board-ready report.
Related terms
- Contribution margin (CM1, CM2, CM3)Contribution margin is the revenue left from a sale after the variable costs of…
- MER (marketing efficiency ratio)MER is total revenue divided by total marketing spend across every channel.
- Break-even ROASBreak-even ROAS is the return on ad spend at which an order covers its variable…
Where this comes up
How to set break-even ROAS for every campaignA step-by-step method for working out the ROAS each campaign needs to make money, from your own margins, and using it to decide what to fix, cut and scale. How to calculate contribution margin for a Shopify storeA step-by-step guide to CM1, CM2 and CM3 for D2C brands: what goes in each layer, the costs most brands miss, and how to turn it into a daily number.Part of the growth marketing glossary by Shiva Sharma.