Contribution Margins
Contribution margins (or margins) refer to the amount of revenue per product that is available to 'contribute' towards the fixed costs and the profit of the company. Since, for digital products, the variable costs are typically very small, or zero, most of the revenue earned from the sale of a product form the contribution margin. Assuming the contribution margin (unit price - unit variable cost) > 0, then the product merits marketing, since the fixed costs are sunk. This also assumes the product does not cannibalize sales from another product in the product line, if so, the opportunity costs need to be considered.
Maximizing Business Potential
