---
title: "Glossary of offer economics"
description: "The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more."
url: https://offersuite.io/glossary
updated: 2026-10-13
---

# Glossary of offer economics

The words behind offer profit, each with its formula, a worked number computed by the margin engine in Offer Suite's own code, and what it is not. Where Offer Suite pins a term down in its own records, the entry says so.

## The example order

A $40.00 bag of coffee with a $12.00 unit cost, shipped free

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

The terms in that order

|  |  |
| --- | --- |
| [Gross revenue](https://offersuite.io/glossary/gross-revenue) the bag, shipped free | $40.00 |
| [Cost of goods sold](https://offersuite.io/glossary/cost-of-goods-sold) | −$12.00 |
| [Gross margin](https://offersuite.io/glossary/gross-margin) subtotal: revenue less cost of goods, 70.0% | $28.00 |
| [Fulfilment cost](https://offersuite.io/glossary/fulfilment-cost) pick and pack, packaging, the label | −$9.18 |
| Card fees 2.9% + $0.30 | −$1.46 |
| [Refund reserve](https://offersuite.io/glossary/refund-reserve) 5% of revenue | −$2.00 |
| [Contribution margin](https://offersuite.io/glossary/contribution-margin) 38.4%, after every cost | $15.36 |
| [Profit per visitor](https://offersuite.io/glossary/profit-per-visitor) at 3.0% conversion | $0.46 |

Computed by the margin engine in Offer Suite’s own code, in whole cents. Most entries below work through this same order, so their numbers add up with each other.

## Margin and profit What an order keeps, and the ways of stating it.

- [**Break-even price** The lowest price at which an order still covers its own costs. Below it, every sale loses money before any fixed cost is counted.](https://offersuite.io/glossary/break-even-price)
- [**Contribution margin** What an order keeps after every cost that grows with it: product cost, fulfilment, shipping, card fees and refunds. The number an offer should be judged on.](https://offersuite.io/glossary/contribution-margin)
- [**Contribution margin per order** The contribution margin of one order, in money. The same product earns a different amount as a single, in a bundle or on a renewal.](https://offersuite.io/glossary/contribution-margin-per-order)
- [**Contribution margin ratio** Contribution margin as a share of revenue. It says how much of each dollar of sales an order keeps, and how fast a discount eats it.](https://offersuite.io/glossary/contribution-margin-ratio)
- [**Forecast profit** The profit an offer should make per order or per visitor, worked out from its prices and costs before any order exists.](https://offersuite.io/glossary/forecast-profit)
- [**Gross margin** Revenue minus the cost of the goods sold, as a share of revenue. The accounting margin: it leaves out shipping, fulfilment and payment costs.](https://offersuite.io/glossary/gross-margin)
- [**Margin waterfall** An order's revenue stepped down cost by cost to the margin it keeps. It shows which cost takes the most, and which an offer would move.](https://offersuite.io/glossary/margin-waterfall)
- [**Markup** Profit as a share of cost, where margin is profit as a share of price. The same product has a markup far larger than its margin.](https://offersuite.io/glossary/markup)
- [**Realized profit** The profit orders actually made: revenue net of refunds, minus the cost of every unit shipped, per offer and per option, first orders and renewals apart.](https://offersuite.io/glossary/realized-profit)
- [**Unit economics** The revenue and costs of one unit of sale: an order, a customer or a subscriber. For an offer, the unit that matters is the order, then the customer.](https://offersuite.io/glossary/unit-economics)

## Costs What an order costs, at the grain each cost is charged.

- [**Actual fulfilment cost** What an order really cost to ship, from the warehouse's or carrier's own charge, in place of the estimate the forecast used.](https://offersuite.io/glossary/actual-fulfilment-cost)
- [**Billable weight** The weight a carrier charges for: the parcel's weight rounded up to the next step. A few ounces over a step costs the whole step.](https://offersuite.io/glossary/billable-weight)
- [**Cost grain** The level a cost is charged at: per unit, per parcel, per order or as a share of revenue. Counting a cost at the wrong grain misprices every bundle.](https://offersuite.io/glossary/cost-grain)
- [**Cost ledger** A record of every cost with the date it applies from, added to and never overwritten, so each order is costed at what was true on its date.](https://offersuite.io/glossary/cost-ledger)
- [**Cost of goods sold (COGS)** What the units you sold cost you to make or buy. In an offer calculation it is charged per unit, gifts included, at the cost in effect on the order's date.](https://offersuite.io/glossary/cost-of-goods-sold)
- [**Cost restatement** Repricing past orders after a cost is corrected or backdated, while keeping what they were booked with. Both numbers stay, so the change is traceable.](https://offersuite.io/glossary/cost-restatement)
- [**Cost view** One of two ways to cost a past order: with the costs known when it arrived, or with everything known today. They differ whenever a cost was corrected.](https://offersuite.io/glossary/cost-view)
- [**Fulfilment cost** What it costs to get an order out: pick and pack, extra picks, the box and the label. Charged per order or parcel, which is why bundles and gifts change it.](https://offersuite.io/glossary/fulfilment-cost)
- [**Inventory shrinkage** Stock you paid for and cannot sell: damaged, expired, lost or miscounted. Usually costed as a small percentage on top of each unit's cost.](https://offersuite.io/glossary/inventory-shrinkage)
- [**Landed cost** A unit's full cost on your shelf: the supplier's price plus inbound freight, duties and brokerage. The unit cost an offer should be priced on.](https://offersuite.io/glossary/landed-cost)
- [**Missing cost** A cost that was never entered, so the calculation reads it as zero. The order then looks more profitable than it is, by exactly that cost.](https://offersuite.io/glossary/missing-cost)
- [**Packaging cost** The box, mailer, fill and tape an order ships in. Charged per parcel, and it steps up when an order outgrows its box.](https://offersuite.io/glossary/packaging-cost)
- [**Payment processing fee** What the payment processor keeps from each order: a percentage of the amount charged plus a fixed fee. The fixed part weighs most on small orders.](https://offersuite.io/glossary/payment-processing-fee)
- [**Pick and pack fee** What a warehouse charges to pull an order's items and box them: a base fee per order plus a smaller fee for each extra item, gifts included.](https://offersuite.io/glossary/pick-and-pack-fee)
- [**Refund reserve** A share of revenue set aside, in a forecast, for the refunds that will come. It turns an unknown future cost into a rate you can price an offer against.](https://offersuite.io/glossary/refund-reserve)
- [**Shipping cost** What the carrier charges you to deliver a parcel. A cost per parcel set by weight and distance, whatever the customer was charged for shipping.](https://offersuite.io/glossary/shipping-cost)
- [**Split shipment** One order sent in more than one parcel. Every per-parcel cost, the label above all, is paid again for each parcel.](https://offersuite.io/glossary/split-shipment)
- [**Variable cost** A cost that exists because an order does: product, pick, box, label, card fee. It is what contribution margin subtracts, and what an offer changes.](https://offersuite.io/glossary/variable-cost)

## Offer mechanics What an offer changes on the order: price, units, gifts and shipping.

- [**Add-on** A second product offered alongside the main one, to go in the same order. It pays only its own cost and a pick, so most of its price is margin.](https://offersuite.io/glossary/add-on)
- [**Buy one, get one (BOGO)** Buy a unit and get a second free. The price of one order pays the costs of two units, so it works out as a 50% discount on a two-pack.](https://offersuite.io/glossary/buy-one-get-one)
- [**Discount allocation** How a discount on a whole order is divided among its lines. It decides each product's revenue, and so each product's margin.](https://offersuite.io/glossary/discount-allocation)
- [**Discount stacking** Two or more discounts applying to one order: a sale price, a subscription discount, a code. Each looked affordable alone; together they may not be.](https://offersuite.io/glossary/discount-stacking)
- [**Fixed-amount discount** A set sum off the order, such as $10 off. It costs the same on every order, so it weighs far more on a small order than a large one.](https://offersuite.io/glossary/fixed-amount-discount)
- [**Free shipping** Charging the customer nothing for delivery. The carrier still gets paid, so it is a revenue decision that costs what shipping used to bring in.](https://offersuite.io/glossary/free-shipping)
- [**Free-shipping threshold** The order value above which shipping is free. It costs the shipping revenue of every order already above it, and pays only if enough smaller orders top up.](https://offersuite.io/glossary/free-shipping-threshold)
- [**Gift with purchase** A free item added to an order to win the sale. It leaves the price alone and adds a unit cost, a pick and sometimes a heavier parcel.](https://offersuite.io/glossary/gift-with-purchase)
- [**Offer option** One choice a visitor can buy inside an offer: a single, a bundle tier, a subscription. Each option has its own price, costs and margin.](https://offersuite.io/glossary/offer-option)
- [**Percentage discount** A share taken off the price. It comes off revenue in full while most costs stay put, so it removes a much larger share of the margin.](https://offersuite.io/glossary/percentage-discount)
- [**Post-purchase upsell** An offer shown after payment and before the confirmation page, added to the order in one click. It cannot cost the original sale.](https://offersuite.io/glossary/post-purchase-upsell)
- [**Product bundle** Several units sold together at one price, usually below the sum of their prices. It earns more per order because the units share one label.](https://offersuite.io/glossary/product-bundle)
- [**Quantity break** A discount that deepens as the customer buys more units: buy two, save 10%; buy three, save 15%. Each tier is its own order with its own margin.](https://offersuite.io/glossary/quantity-break)
- [**Shipping revenue** What the customer pays for delivery, after any shipping discount and before tax. It is revenue of the order, separate from what the label costs.](https://offersuite.io/glossary/shipping-revenue)
- [**Threshold top-up** A customer adding to their cart to reach a free-shipping or gift threshold. What it gains depends on how far below the threshold they started.](https://offersuite.io/glossary/threshold-top-up)

## Measuring an offer Comparing offers on the visitors they share.

- [**Average order value (AOV)** Total order revenue divided by the number of orders. Useful for spotting a trend, misleading for setting thresholds because it hides the shape of your orders.](https://offersuite.io/glossary/average-order-value)
- [**Break-even conversion lift** How much more an offer has to convert to earn, per visitor, what another offer earns: the gap a cheaper offer, a gift or a discount must close.](https://offersuite.io/glossary/break-even-conversion-lift)
- [**Cohort simulation** Running a group of customers through a plan many times, with chance and uncertain inputs varied, to get a range of outcomes instead of one number.](https://offersuite.io/glossary/cohort-simulation)
- [**Conversion rate** The share of visitors who buy. An offer test's most reported number and its least sufficient: a better-converting offer can earn less.](https://offersuite.io/glossary/conversion-rate)
- [**Goal seek** Working backwards from a target to the input that reaches it: the price, acquisition cost or renewal rate at which a plan pays back.](https://offersuite.io/glossary/goal-seek)
- [**Profit per visitor** The profit an offer earns for every visitor who sees it: margin per order times conversion rate. It weighs a lower price against more buyers fairly.](https://offersuite.io/glossary/profit-per-visitor)
- [**Revenue per visitor** Revenue divided by the visitors who saw an offer: price times conversion. Better than conversion alone, and still blind to what the orders cost.](https://offersuite.io/glossary/revenue-per-visitor)
- [**Sensitivity analysis** Moving each input of a plan up and down by the same step to see which one changes the result most. It shows where to spend effort.](https://offersuite.io/glossary/sensitivity-analysis)
- [**Split test** Showing two versions of an offer to randomly divided visitors over the same period, and comparing what each earns. Also called an A/B test.](https://offersuite.io/glossary/split-test)
- [**Take rate** Of the people who buy an offer, the share who choose a given option. It sets the offer's blended margin as much as any single price does.](https://offersuite.io/glossary/take-rate)
- [**What-if analysis** Recomputing an offer's profit with one input changed, such as a cost or a price, and everything else held as it is today.](https://offersuite.io/glossary/what-if-analysis)

## Subscriptions First orders, renewals and what a subscriber is worth.

- [**Churn rate** The share of subscribers who leave in a period, or between one order and the next. The complement of retention, and it compounds the same way.](https://offersuite.io/glossary/churn-rate)
- [**Cohort analysis** Following a group of customers who started together, month by month: how many remain, and what they have earned so far.](https://offersuite.io/glossary/cohort-analysis)
- [**Customer lifetime value (LTV)** The profit a customer brings over the orders they stay for: the first order's margin plus each later order's, weighted by who is still buying.](https://offersuite.io/glossary/customer-lifetime-value)
- [**Intro offer** What a new subscriber gets on the first order only: a deeper discount, a gift, a free trial. It buys the subscriber and is repaid by renewals.](https://offersuite.io/glossary/intro-offer)
- [**One-time purchase** An order with no subscription attached. It earns its whole margin on day one, and nothing afterwards unless the customer chooses to return.](https://offersuite.io/glossary/one-time-purchase)
- [**Renewal curve** The renewal rate at each order number: who takes the second order, the third, the fourth. It starts low and settles higher as the casual leave.](https://offersuite.io/glossary/renewal-curve)
- [**Renewal order** A subscription order the subscriber didn't place by hand, billed by the subscription contract. Priced at the renewal price, without first-order-only costs.](https://offersuite.io/glossary/renewal-order)
- [**Retention rate** Of subscribers who received an order, the share who receive the next one. Each renewal's profit is weighted by it, so small changes compound quickly.](https://offersuite.io/glossary/retention-rate)
- [**Subscribe and save** A standing discount for buying on subscription, often with a deeper first-order discount. Its cost has to be priced over the renewals, not the first order.](https://offersuite.io/glossary/subscribe-and-save)
- [**Subscriber lifetime** How many renewals a subscriber is expected to take before leaving. Churn puts a ceiling on it, and on what a subscriber can ever earn.](https://offersuite.io/glossary/subscriber-lifetime)
- [**Subscription app fee** What a subscription app charges per recurring order, often a percentage plus a fixed fee. A cost of subscription orders that one-time orders never pay.](https://offersuite.io/glossary/subscription-app-fee)
- [**Subscription interval** How often a subscription ships: every 30 days, every 60. It sets how many renewals fit in a year, and so how fast a subscriber pays back.](https://offersuite.io/glossary/subscription-interval)
- [**Welcome gift** A gift or insert that ships only with a subscriber's first order. A cost of winning the subscriber, which renewals do not carry.](https://offersuite.io/glossary/welcome-gift)

## Acquisition and payback What a customer costs to win, and when that comes back.

- [**Allowable CAC** The most you can pay to acquire a customer and still be paid back by a chosen month. A ceiling for the ad account, set by the offer.](https://offersuite.io/glossary/allowable-cac)
- [**Break-even ROAS** The return on ad spend at which an order's margin exactly pays for the ads that won it: one divided by the contribution margin ratio.](https://offersuite.io/glossary/break-even-roas)
- [**CAC payback period** How long a customer takes to earn back what they cost to acquire. With churn counted, it is later than the simple division suggests.](https://offersuite.io/glossary/cac-payback-period)
- [**Customer acquisition cost (CAC)** What it costs to win one new customer: spend divided by customers won, or the cost of a visitor divided by the share of visitors who buy.](https://offersuite.io/glossary/customer-acquisition-cost)
- [**First-order loss** What a customer still owes after their first order: acquisition cost minus the first order's margin. The sum that later orders must earn back.](https://offersuite.io/glossary/first-order-loss)
- [**LTV to CAC ratio** What a customer is worth divided by what they cost to win. Above 1, acquisition pays for itself within the horizon; how far above is the return.](https://offersuite.io/glossary/ltv-to-cac-ratio)
- [**Peak cash need** The most cash an acquisition programme has out at once before renewals catch up. A profitable plan can still need more cash than you have.](https://offersuite.io/glossary/peak-cash-need)
- [**Return on ad spend (ROAS)** Revenue attributed to advertising divided by what the advertising cost. A revenue ratio: it says nothing about whether the orders made money.](https://offersuite.io/glossary/return-on-ad-spend)

## Orders and revenue How a real order's money is counted.

- [**Cancelled order** An order cancelled after it was placed. It is not a sale: no revenue, refund, cost or profit should count for it, whether or not money was refunded.](https://offersuite.io/glossary/cancelled-order)
- [**Gross revenue** An order's revenue as Offer Suite books it: line prices after discounts plus shipping charged, tax excluded, frozen at the sale as placed.](https://offersuite.io/glossary/gross-revenue)
- [**Net revenue** Revenue after refunds: what orders brought in, less what was given back. The revenue that profit is worked out from.](https://offersuite.io/glossary/net-revenue)
- [**Refund rate** Refunded revenue as a share of revenue. A point of refund rate costs more than a point of margin, because refunded orders keep their costs.](https://offersuite.io/glossary/refund-rate)
- [**Refunded revenue** The part of an order's revenue given back, counted after discounts and before tax, and never taken off the order's cost, because the goods already shipped.](https://offersuite.io/glossary/refunded-revenue)