Jacob Baadsgaard (Founder & CEO of Disruptive Advertising) shows how to determine and track the contribution margin in order to make the marketing initiatives profitable. Basically contribution margin is the difference between the amount of money made from the sale and the variable cost associated with that sale. The easiest way to predict the success of the marketing efforts is by following the rule of thumb.
§ 1X contribution margin:- making extreme loses
§ 2X contribution margin:- making losses
§ 3X contribution margin:- breaking even
§ 4X contribution margin:- starts making profit
§ 5X contribution margin:- accelerates the progress of the company
So, higher the contribution margin higher is the profit made by the company. Therefore, it is of utmost importance to get rid of non-profitable aspects of marketing. To know the contribution margin of a company it is essential to know the customer lifetime value, marketing sales and marketing spend. Read more at: http://marketingland.com/contribution-margin-tell-marketing-makes-cents-180717