Knowing the gross margins of your products provides insights on your overall profitability when advertising on Amazon. Flywheel gives you two different metrics for measuring margin, one that includes your ad spend and one that does not. These are referred to as: 'Pre-Ad Gross Margin' and 'Estimated Gross Margin'.
Your pre-ad gross margins indicate how much money you can spend on advertising and still turn a profit on each sale (this is helpful when setting MACS in the profit stage). Whereas your estimated gross margins inform you of how profitable you are post advertising spend.
Calculate your 'Pre-Ad Gross Margins' at the product level:
List Price - (COGS + Amazon Fees + FBA Fees) / Sales Price = Pre-Ad Gross Margins
Calculate your 'Gross Margins' at the product level:
List Price - (COGS + Amazon Fees + FBA Fees + Ad Spend) / Sales Price = Gross Margins
In the example above, if the MACS is lower than the average pre-ad gross margin, you should expect to make a profit on each sale. The likeliness of this occurring is increased if the 'pre-ad gross margin range' is within 10%, meaning pre-ad gross margin of each product in the campaign is within 10% (i.e. range from 20%-30%).
You can also see situations where the pre-ad gross margin range is greater than 10 points. It’s possible ASINs can appear to be less profitable due to Amazon’s attribution. If your campaigns are structured based by parent ASIN, this is normal. If you have many parent ASINs grouped together, consider restructuring your campaigns.
Not seeing your pre-ad gross margins in Flywheel?
In order for Flywheel to automatically calculate your gross margins, you must upload your cost of goods sold (COGS) to Flywheel. How to upload COGS. It can take up to 24 hours for the margins to populate on the campaign page.
Important Note: Pre-ad gross margins on the campaign performance page are calculated based on the 'list price' of the product, rather than the 'sale price' as they are on within the product metrics.
How to Set MACS: The Basics
What are COGS?
Using the Product Metrics Page
Campaign Configuration Checklist - learn about best practices!