There’s one key metric that demonstrates the overall health of your marketing. It’s not CPA, it’s not ROAS, and it’s not even CM3 by itself. It’s contribution margin per session.
I.e. for every user who lands on your website, how much profit do they give you?
TL;DR
Most performance marketers obsess over the wrong numbers. They'll tell you their 3.5x ROAS like it means something. But ROAS doesn't account for your actual costs. CAC doesn't tell you about session quality. LTV:CAC ratios are too slow to act on.
This is a great metric because it ignores industry differences.
I very often get asked what is a ‘good conversion rate?’
“It depends” is the most boring answer in the book, but conversion rate is meaningless without know other things.
Revenue per session is useful, and perhaps the easiest one to spit out because you can do this in Meta without any contribution margin calculations.
But this doesn’t show you everything.
Consider this:
Brand A has a 3% conversion rate and a 35% margin. They sell food products.
Brand B has a 3% conversion rate and a 82% margin. They sell clothes.
Brand C has a 3% conversion rate and a 65% margin. They sell premium supplements.
3% conversion rate now doesn’t mean much. If those CPAs were equal for all three, then it’s likely the difference between paid social being great for Brand B, ok for Brand C, and a danger zone for Brand A.
That’s why contribution margin per session is so important.
I had a call last week with a founder who told me that their conversion rate was 3%, “it’s good” they said. We have a brand doing a 2% conversion rate with more than 3x their contribution margin. One is healthy, one needs fixing.
Contribution margin/session (CM/S) changes throughout the year, and so it’s important to think of this metric now as we get into Q4, and especially good for planning as you start to think about BFCM and December sales.
Things we'll be covering:
Why this metric beats everything else
What good looks like at different spend levels
How it changes your Q4 strategy
How to improve your CM/S
Let's get into it.
Why contribution margin per session is the ultimate health check
I've audited over 200 ad accounts in the last 3 years. Big ones, small ones, DTC, subscription boxes, luxury goods, you name it.
One pattern is prominent throughout.
Most will talk about CPA, maybe ROAS. Some talk about LTV.
I will ask about contribution margin and there’s usually some thinking. It’s not a common metric that gets discussed. But it’s a vital one because it shows health of your business.
Almost all brands want us to help them scale. But if your revenue per session is low for your bracket of spend, then it’s only going to worsen as it scales.
ROAS doesn't know if you're dropshipping at 10% margins or selling software at 90%. Contribution margin does.
It measures effectiveness, not just efficiency
A £2 contribution margin per session is good whether you're selling £20 t-shirts or £2,000 handbags. Try saying that about AOV.
It responds immediately to changes
Unlike LTV metrics that take months to materialise, you can see session quality changes in real-time.
It forces focus on what matters
When you optimise for this, you naturally improve everything else: better targeting, higher conversion rates, better pricing.
The benchmarks that separate winners from losers
We've analysed this across £14m of ad spend over the last year. Here's what separates the businesses that scale from those that stall.
A bit on methodology, we’ve grouped this by level of ad spend. The reason being is as spend goes up, diminishing returns kick in, your bid goes up on Meta, and CPA rises. With that means lower CM/S.
There’s 4-6 brands for each segment here.
📊 Spending up to £20k/month
Median: £0.51 per session
There’s a lot of variance here. These accounts we’re either pushing through our accelerator programme, are actively advising, or supporting in other ways.
At the lower end we have brands with £0.10 of contribution margin per session. This is pure product-market fit issues and the key issues are finding ways to sell your product.
Levers here are: pricing, conversion optimisation, proposition, product.
At the high end it approaches £2.50 per session, a really strong sign that the brands are about to start scaling.
📊 Spending £20-60k/month
Median: £0.66 per session
The median here accounts for the fact that some of the brands might be leaning into subscription plays and therefore have lower tolerance for first order profitability. But make no mistake, if you don’t have (A) strong retention, or (B) the cash flow to support those payback periods, then this isn’t a game for you.
Brands here typically hit diminishing returns on the platforms for the first time. The challenges these brands face is moving beyond a very initial audience of early adopters who are cheap to acquire. As they do, they need to shift advertising strategy.
What usually happens in this phase is a brand progresses from an initial core creative approach into a more diverse one. With this become teething issues as brands become comfortable with the fact that not all customers look the same, and some of them respond to very different types of advertising.
Before this starts working, CM/S drops down again, but as you crack it, those in the strongest scale positions are hitting £2, £2.50, or £3 of CM/S.
📊 Spending £60k+ per month
Median: £1.70
Our dataset here includes brands spending £60-£280k/month. Here the medians are much higher than the earlier stages.
In general to progress to this stage, you need to have got a multitude of factors right in the midstage. Namely:
Diverse creative approach
System for producing large volumes of creative at scale
Strong understanding of customer
Continual experimentation with conversion optimisation
In peak times this can hit £6.50+ per session, but for the most part, if you’re hitting £3-4 you’re in a very strong space that demonstrates continual ability to scale.
Why this matters for your Q4 strategy
We’re about to step into Q4 and with that the madness will ensure and follow.
November and December are typically the best CM/S periods for most brands. But this is especially true for those who are the highest spenders. This isn’t a coincidence.
Q4 should lead to some of your cheapest acquisition of the year. Between sales and gift buying and treats to yourself, we’re in the most consumerist part of the year. People are ready to buy. That leads to cheap CPA.
But that by itself isn’t enough to cause massive spikes.
For low and mid spenders, this might mean 50-200% increases in CM/S as acquisition costs drop considerably and AOVs rise.
But for the biggest spenders, this period often sees CM/S increases of 2-3x.
£5, £6, £7 per session isn’t impossible during this period of the year. And unsurprisingly these are the areas where you can push the hardest in spend terms.
As you’re thinking about offer testing for the peak season, this becomes vitally important. CP/S gives you the true read of where you should be aiming efforts.
But it’s also time to think about how to bundle up and push more spend. Even single-product DTCs need to think about how to bundle up here. Extra gifts, higher order volumes, one-off bundles, this is where you can turn good into great.
How to actually improve your contribution margin per session
Look, improving this isn't rocket science. But it requires doing uncomfortable things.
Price testing beats everything
Do not, do not, DO NOT just change your price. Price changes impact your conversion rate, and therefore CPA, and you guessed it CM/S.
The great thing about price changes is that there is a equilibrium of the best price. Certain prices go up and drive more revenue and increase conversion, or at least maintain it. Other prices can barely increase at all but can crater your conversion rate and spike CPA.
So you have to test this. Testing this requires good enough spend and good enough volume.
Install Intelligems, pay for the premium tier, and get to work.
Be quick and responsive. And remember that expected value might help you find answers faster than p value.
Pricing is something we have deep psychological feelings about.
Every founder seems to worry about being ‘too expensive’.
Every customer in the world complains about price. “I wish it was cheaper” is what you’ll hear from everyone. But ultimately, people are less price-sensitive than you think, and if they’re buying it they’re bought into the value.
Most people price based on either (A) competitor pricing or (B) margin. Not on value to customer or willingness to pay.
There’s lots on psychology of round numbers, of precise numbers, of .99s, of not including pound signs. And there’s lots reported on it too. Don’t overcomplicate this, run an A/B test, especially on a one-off sale item.
Improve your advertising
Every incremental pound of spend requires more effort to combat diminishing returns.
If you just 2x your spend, your CPA will go up and CM/S go down.
You need more ads, better ads, more insights, better psychology to scale.
If you need 100 active ads to spend £100k/month, and 1 in 4 ads fails for you, then you need 400 tests just to find those 100. And that’s if you could achieve that all at once, by the time you’ve found winners, others will have fatigued. You need fast testing.
Improve conversion rate
If you have a 30% margin, £40 AOV product then a 2% conversion rate won’t cut it. Neither will a 4% conversion rate. You’re going to need 6-10% conversion rates for that to make sense.
Get strangers to walk through your website and talk through what they think.
Customer interview and stick that copy into LPs
Experiment with landing pages relentlessly
Put LP learnings into the homepages
Aim experiments at highest traffic areas first. If no-one goes to your homepage, then don’t bother with it.
Improve your margins
Growth is not just about getting more affordable customers or fewer diminishing returns as you scale, it’s also about improving margin. Run experiments on packaging, 3pls, fulfilment options.
There’s a reason lots of very large brands vertically integrate: they realise that margin is a growth lever.
There’s no hiding behind CM/S, and that’s why it’s easy to ignore. But if you’ve got CM/S below £1 and don’t have v. strong retention and enough cash to support your payback period you’re in trouble.
And ‘very good’ is £3+.
Conversion rates can hide all sorts of sins. CPA can too.
Most scale problems aren’t to do with Meta, they’re to do with CM/S.
Get your ducks in a row. Review your CM/S now. Think about what you can actively do to improve it, and focus attention on getting it up. This is not just the job of your advertising, it’s the job of the full funnel.
🔗 When you’re ready, here’s how Ballpoint can help you
→ Profitably grow paid social spend from £20k/m → £300k/m
→ Create full funnel, jobs to be done-focused creative: Meta, TikTok, YouTube
→ Improve your conversion rate with landing pages and fully managed CRO
→ Maximise LTV through strategic retention and CRM - not just sending out your emails
Email me – or visit Ballpoint to find out more.
NB: We support brands spending above £20k/month.
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