Profitability management (POAS / Margin)

This guide explains how to switch from advertising management based on revenue (ROAS) to management based on actual profitability (POAS - Profit on Ad Spend).

1. Business value: Why manage by margin?

Traditional ROAS management can be misleading: a product that generates a lot of revenue but has a low margin may turn out to be unprofitable once advertising costs are deducted.

• Real Profit Optimisation: Focus your advertising investments on the products that contribute most to your bottom line.

• Unified Business Vision: Align your marketing teams with the profitability objectives of the finance department.

• Algorithmic Resilience: Provide algorithms (Google, Meta) with the most valuable signal so that they optimise your campaigns for profitability rather than gross volume.

2. Implementation methodology in Platform X

Step A: Margin data injection

To manage profitability, the platform needs to know the cost or margin of each product sold. This is done via the product catalogue.

• Documentation: Product catalog | Commanders Act X

Step B: Configuration of Enrichment

Link your transaction events (purchases) to your catalogue to retrieve the unit margin for each product at the time of sale.

• Documentation: Configure Event Enrichment.

Step C: Calculating conversion value (Data Cleansing)

Use the cleansing module to dynamically calculate the total margin of the order (sum of product margins) and assign it to a new property, for example order_profit.

• Documentation: Using calculation functions in Data Cleansing.

Step D: Setting up the Destination

Configure your advertising connector to send the order_profit value in the ‘Conversion Value’ field instead of the total basket amount.

• Documentation: Destination Catalogue | Commanders Act X​

Step E: Validation via the Event Inspector

Check that the outgoing hit to your partner (e.g. Google Ads) contains the calculated margin in the value field.

• Documentation: Data Cleaning | Commanders Act X

3. Typical use cases

1. Google Shopping campaign arbitrage: Identify ‘top-selling’ products that are actually ‘low-profit’ due to low margins. Reduce advertising pressure on these products in favour of high-margin products.

2. Smart Bidding on Margin (Meta CAPI): By sending the margin as a conversion value, Meta's ‘Value-based Lookalike’ algorithm will search for buyer profiles similar to those that generate the most profit for you.

3. Profitability analysis by channel: Use enriched profit data to compare the net profitability of your various acquisition levers (SEO vs SEA vs Social) directly in your BI tools.

Need help with implementation?

Our experts will assist you in setting up your profitability calculations and sending these signals to your advertising agencies. Contact our support team: [email protected]