The Signal Stack for Sustainable DTC Growth

Chasing the highest ROAS often limits DTC brands from achieving their true growth potential.

Instead, sustainable growth in DTC requires a Contribution Profit-first framework supported by a Signal Stack of key performance indicators. Like how a Tech Stack is a portfolio of technology and apps that support your brand’s underlying structure, a Signal Stack prioritizes your metrics into what to focus on first. That way you align marketing metrics with meaningful business outcomes.

Instead of being overwhelmed with metrics, should we be looking at CPC, what about our AOV, XYZ, it gives clarity. There’s a time and place for deeper dives into tertiary signals but if your car were on fire, you wouldn’t be eager to see if you need an oil change. This isn’t about chasing the highest ROAS or Blended ROAS, it’s about aligning all metrics to your absolute profitability goals while growing with intention.

Contribution Profit is what actually matters. It’s the cash left after covering your ad spend, cost of goods, and customer variable expenses (like pick and pack, transaction fees, and last-mile shipping). It’s the money you have left to “contribute” to operating expenses and net profit.

Here’s the formula:

• Order Revenue* - Ad Spend - Customer Variable Costs = Contribution Profit

Now, here’s where a higher ROAS falls short. In a hypothetical example:

1. At a Blended ROAS 3.2, $100K in ad spend generates $320K in revenue. After subtracting $112K for COGS and customer variable costs, and Ad Spend, you’re left with $108K Contribution Profit (33.8% Contribution Margin)

2. At Blended ROAS 2.6, $200K in ad spend generates $520k in revenue. After subtracting $182K for COGS and customer variable costs, you’re left with $138K Contribution Profit (26.5% Contribution Margin)

Lower Blended ROAS efficiency and Contribution Margin efficiency, yet $30K more in absolute Contribution Profit. Aka dollars in the bank that can be used to contribute to Operational Expenses and what’s left is Net Profit.

This doesn’t mean blindly scaling your ad spend. There’ll be a point of diminishing returns where incremental spend creates negative Contribution Profit, and that’s hidden in averages like blended ROAS (MER)

The goal isn’t perfection but balance in your Signal Stack:

• True North Signal: Contribution Profit and Contribution Margin

• Primary directional signal: Order Revenue, Blended ROAS (MER), Blended Acquisition Cost, Blended AOV

• Secondary directional signal: New Customer Order Revenue, New Customer ROAS, Customer Acquisition Cost, New Customer AOV as your

• Tertiary fine-tuning signal. Channel-specific ROAS like Facebook and Google ROAS

Scaling not only profitably but sustainably means focusing on the cash in your bank account, not just chasing efficiency metrics. Change the incentive of what’s rewarded and receives credit.

*Order Revenue = Gross Sales - Discounts + Taxes + Shipping. This is before returns because we would want returns viewed as a Product component and distinguish it from Marketing. For example, what if one day the product quality increased and returns decreased, credit is in Product Development.