Calculation of the client's unit economics
Posted: Wed Jan 29, 2025 10:14 am
If the unit is a client who brings in income throughout the entire interaction period, then it is necessary to calculate what is greater - the profit or the cost of attracting him.
Customer Unit Economics = LTV / CAC
It is logical that LTV should exceed CAC, and the higher it is, the more profitable it is for the business.
If LTV = or <CAC, you need to change your customer acquisition strategy, optimize your promotion costs, or completely change your commercial model.
Parameters and formulas for calculating physicians email list the client's unit economics:
Customer Acquisition Cost (CAC) — the average cost of attracting a customer CAC = marketing expenses / number of people attracted
Lifetime Value (LTV) — net revenue from a client over the entire contact period LTV = (ARPU – variable costs) x LT
Average Revenue Per User (ARPU) — the amount of revenue for a specific time period ARPU = total revenue / number of customers
LifeTime (LT) — how long on average does a client use a service (product) The calculation procedure for LT depends on the specifics of the business. For example, LT = 1 / churn rate
For companies that serve a client by creating subscriptions and other options for them over a long period of time, and at the same time maintain a client base, it is more convenient to calculate LT using the churn rate (CR):
KO = (KC - LF ) / LF,
Where:
NC — the number of current clients in the database at the beginning of the period.
CC — number of clients at the end of the period. This refers to customers who remained in the database from those who were listed at the beginning of the period. If new clients appeared, we do not take them into account.
Let's look at an example of such a calculation. In December 2022, the Glavfrukt enterprise purchased and sold fruits, delivering them to homes. On Saturdays and Sundays, customers received fruits according to a pre-agreed list. As a result, the financial indicators as of December 31 were as follows:
Total revenue: RUB 497,000.
Variable costs - RUB 231,000.
Marketing expenses - 100,000 rubles.
Attracted - 250 clients.
We calculate SAS
Marketing expenses - 100,000 rubles:
RUB 32,000 — contextual advertising.
RUB 28,000 — advertising on online bulletin boards.
RUB 8,000 — advertising in print media.
RUB 22,000 is the salary of an advertising specialist.
10,000 rubles is the designer’s salary.
In just one month, 250 clients were attracted.
CAC = 100,000 rubles / 250 = 400 rubles - the cost of one client at Glavfrukt for December 2022.
Calculating ARPU
Total revenue: RUB 497,000.
ARPU = RUB 497,000 / 250 = RUB 1,988 — this is the average revenue one client brought in in December 2022.
Customer Unit Economics = LTV / CAC
It is logical that LTV should exceed CAC, and the higher it is, the more profitable it is for the business.
If LTV = or <CAC, you need to change your customer acquisition strategy, optimize your promotion costs, or completely change your commercial model.
Parameters and formulas for calculating physicians email list the client's unit economics:
Customer Acquisition Cost (CAC) — the average cost of attracting a customer CAC = marketing expenses / number of people attracted
Lifetime Value (LTV) — net revenue from a client over the entire contact period LTV = (ARPU – variable costs) x LT
Average Revenue Per User (ARPU) — the amount of revenue for a specific time period ARPU = total revenue / number of customers
LifeTime (LT) — how long on average does a client use a service (product) The calculation procedure for LT depends on the specifics of the business. For example, LT = 1 / churn rate
For companies that serve a client by creating subscriptions and other options for them over a long period of time, and at the same time maintain a client base, it is more convenient to calculate LT using the churn rate (CR):
KO = (KC - LF ) / LF,
Where:
NC — the number of current clients in the database at the beginning of the period.
CC — number of clients at the end of the period. This refers to customers who remained in the database from those who were listed at the beginning of the period. If new clients appeared, we do not take them into account.
Let's look at an example of such a calculation. In December 2022, the Glavfrukt enterprise purchased and sold fruits, delivering them to homes. On Saturdays and Sundays, customers received fruits according to a pre-agreed list. As a result, the financial indicators as of December 31 were as follows:
Total revenue: RUB 497,000.
Variable costs - RUB 231,000.
Marketing expenses - 100,000 rubles.
Attracted - 250 clients.
We calculate SAS
Marketing expenses - 100,000 rubles:
RUB 32,000 — contextual advertising.
RUB 28,000 — advertising on online bulletin boards.
RUB 8,000 — advertising in print media.
RUB 22,000 is the salary of an advertising specialist.
10,000 rubles is the designer’s salary.
In just one month, 250 clients were attracted.
CAC = 100,000 rubles / 250 = 400 rubles - the cost of one client at Glavfrukt for December 2022.
Calculating ARPU
Total revenue: RUB 497,000.
ARPU = RUB 497,000 / 250 = RUB 1,988 — this is the average revenue one client brought in in December 2022.