Most product reports rank SKUs by revenue. That tells you what sold, not what is good for the business. A product can top the revenue chart while losing money after returns and discounts, or sit in the middle while quietly bringing in your most loyal customers. Measuring product performance properly means looking at a few more dimensions, and most of them are available with tools you already have.
The five questions I ask about every product
Does it make money? Revenue minus COGS, discounts, shipping, payment fees, and returns. This is contribution margin by product, and it reshuffles most rankings. Heavily discounted bestsellers often drop. Full-price niche products often rise.
Does it stay sold? Return and refund rate by product, ideally by reason. Apparel brands in particular can have products that look great on gross revenue and terrible net of returns. I covered tools that handle this in attribution tools for apparel brands with high return rates.
Does it bring in new customers? Look at first orders only and see which products show up most. Those are your acquisition products, and they deserve more of your prospecting creative.
Does it bring them back? Repeat purchase rate and 90-day or 12-month value for customers whose first order included the product. Two products with the same revenue can produce very different customers.
Which ads actually sell it? Product-level attribution, meaning which channels, campaigns, and ads drove orders containing each SKU. This is the one most brands skip, and it is where a lot of ad budget gets wasted on products that do not convert from paid traffic.
Where to get each number
Your store platform covers the basics. Shopify, WooCommerce, BigCommerce, and Magento all report sales, units, and returns by product, and most let you filter to first-time customers. Add COGS to your products in the platform and you can get rough gross margin by SKU without another tool.
For margin after all costs, a profit tool helps. TrueProfit includes product analytics from its $35 a month Basic plan, and Lifetimely covers product-level LTV and P&L on order-based pricing.
For acquisition and ad performance by product, you need attribution that goes to the SKU. ThoughtMetric ties marketing touchpoints to revenue at the SKU level, so you can see which channels and ads sell each product, split by new and returning customers. (Disclosure: ThoughtMetric sponsors this site.) It starts at $99 a month for 50,000 pageviews. Northbeam has a Product Analytics feature for which products work best in ads, at a much higher price. For more options, see product-level attribution tools for e-commerce.
Putting it into one view
I keep a simple table, refreshed monthly, with one row per top product and columns for net revenue, contribution margin, return rate, share of first orders, repeat rate of customers acquired with it, and paid ROAS for that product. Then I sort products into four groups. Acquisition heroes have high first-order share and decent margin, so push them in prospecting. Profit engines have high margin and repeat rate but low first-order share, so feature them in email and retention. Traps have high revenue but poor margin or high returns, so fix pricing or stop advertising them. Passengers are fine but unremarkable, so leave them alone.
Common mistakes
Judging new products too fast, before they have enough traffic. Crediting a product with revenue from bundles it rarely drives. Reading product ROAS from ad platforms, which credit every product in the cart to the ad regardless of which one the ad showed. And ignoring stock: a product that converts well but keeps selling out is a supply problem, not a marketing one.
The checklist
- Rank products on contribution margin after returns, not gross revenue.
- Find your acquisition products from first orders.
- Track repeat rate by first product.
- Use SKU-level attribution, such as ThoughtMetric (our sponsor), to see which ads sell which products.
- Sort products into heroes, engines, traps, and passengers, and act on each group.
Leave a Reply