Contribution Margin After Marketing: What It Is + Formula

What is Contribution Margin After Marketing (CMAM)?

Contribution Margin After Marketing (CMAM) measures the amount of revenue a business retains after accounting for variable costs and marketing expenses. This metric provides insights into the profitability of individual products or services by determining how much money is left to cover fixed costs and generate profit after marketing efforts.

For businesses heavily invested in advertising and promotional activities, CMAM is a critical indicator of how effectively marketing spend contributes to profitability. High CMAM values suggest efficient resource allocation, while low or negative values may point to opportunities for cost optimization or strategy adjustments.

How to Calculate Contribution Margin After Marketing (CMAM)

The formula for calculating CMAM is:

CMAM = Sales Revenue − Variable Costs − Marketing Expenses

Example Calculation

Imagine a company sells 10,000 units of a product priced at $20 each. The variable cost per unit is $8, and the total marketing expense for the campaign is $50,000.

1. Sales Revenue: $20 × 10,000 = $200,000

2. Variable Costs: $8 × 10,000 = $80,000

3. Marketing Expenses: $50,000

CMAM = $200,000 − $80,000 − $50,000 = $70,000

The result shows that after accounting for variable costs and marketing expenses, the business retains $70,000 to cover fixed costs and generate profit.