How do marketing cost calculation settings affect contribution margin and other metrics?

Last updated: November 5, 2025

Your marketing cost calculation settings directly impact how contribution margin and other key metrics are calculated in your reports. Understanding these settings helps you configure metrics that align with your business accounting practices.

Impact on Contribution Margin

Changing your calculation settings will affect contribution margin because all marketing costs included in the selected setting are factored into the formula. If you remove certain costs (like agency fees) from marketing calculations, your contribution margin will increase accordingly.

Calculation Setting Options

You have several options for how marketing costs are calculated:

  • Advertising Spend Only: Includes only paid advertising costs in CAC calculations

  • Advertising Spend & Other Marketing Costs: Includes all marketing-related expenses in calculations

Best Practices

There's no universal best practice - it depends on your business structure:

  • Agency as staff replacement: If your agency replaces in-house marketing staff, consider moving agency fees to operational/staffing costs

  • Agency alongside in-house team: If you use agencies in addition to internal marketing staff, you may want to keep agency fees as marketing spend

  • Accurate CAC reporting: If you want CAC to reflect only paid advertising, select "Advertising Spend Only"

  • Comprehensive marketing view: If you have other marketing tools (like email platforms) that impact acquisition and retention, include them for more accurate reporting

Moving Costs to Business Expenses

If you move marketing costs (like agency fees) to business expenses instead:

  • They will be removed from all marketing metric calculations

  • They won't impact contribution margin

  • They will only affect net profit calculations

  • This avoids double-counting expenses in your P&L

Retroactive Updates

When you change your calculation settings, the updates will apply retroactively to all historical data unless you set specific start and end dates for different cost categories.