Why would you run a marketing campaign that costs more than the profit it generates? As absurd as it might sound, this situation actually represents one that many marketers unknowingly find themselves in.
Let’s say you’re running all of the marketing for a single-product ecommerce store. The shop makes a $20 profit from each sale before taking into account any marketing spend. Now let’s say that someone pitched you an idea on how you could generate more sales by spending $30 of marketing dollars per sale. Chances are you’d scoff at the idea, right? However, even though marketing campaigns can appear profitable at an aggregate level if the cost per sale is below $20, it doesn’t mean that every sale generated is costing the brand less than $20. That means that even when we’re profiting at an aggregate level, we can still be losing money. To understand why this is the case, we need to understand the idea of marginal metrics.
