User is the basic term for the Unit economics understanding. It is the key object we work with. Generally User is a person who learned about our product through the advertisement. For the Internet-projects it is a visitor who came to the site. By “User” we can also mean a company we contacted by the cold calling. In fact, we are talking about a card in CRM.
User acquisition (UA)
The number of Users we acquired. It shows how many Users learned about our product through different marketing strategies. For example, how many visitors came to the site through the search engine advertising or how many companies we contacted by the cold calling.
Conversion to first purchase (C1)
Index of conversion from User to Buyer. First purchase separates Users who just came to the site from Users who made a purchase and became Buyers.
Buyer is a customer and also the number of customers we get from the User flow with our conversion index. B = UA x C1
Average Price (AvP)
Average price – the sum of money our customer paid for our goods or services.
Cost of Good Sold (COGS)
Cost of goods sold is an important value. It shows our costs for every sale. It is very important to differ regular expenses we bear whether we have customers or not from nondiscretionary expenses for every sale. For example, if we sale some goods, COGS will include the money we spent to buy them. For b2b sales COGS may include the bonus that we pay our sales manager for every sale.
First sale COGS (1sCOGS)
Additional costs for the first sale. It is important to understand that these additional costs should be added to COGS. The additional costs are, for example, expenses for pilot launches and integrations for corporate clients, or an extra fee for our sales agent.
Average Payment Count (APC)
Average number of payments made by one customer during a set period of time. APC by default is counted for the whole life period. This value should be calculated carefully. It should never be rounded up.
Average Revenue per Customer (ARPC)
Average revenue per customer shows how much we get from sales to one customer during a set period of time. It doesn’t include the marketing cost. ARPC is determined by the formula ARPC = (AvP — COGS) x APC — 1sCOGS. ARPC is an important value for business effectiveness estimation. By comparing it to CAC we can measure the return on marketing investments.
Average Revenue per User (ARPU)
Average revenue per User shows how much we gain from each User. It doesn’t include the marketing cost. ARPU is determined by the formula ARPU = ARPC x C1. ARPU is an important value for business efficiency estimation. By comparing it to CPA we can measure the return on marketing investments.
Customer Acquisition Cost (CAC)
Customer acquisition cost shows how much we spent on getting the customer. For example, we can divide the marketing budget by the number of customers we attracted.
Cost per Acquisition (CPA)
Cost per acquisition of one User. It is determined by dividing the entire marketing budget by the number of all Users. Unlike CAC, CPA is an actionable metric. It doesn’t depend on other metrics, such as conversion or User flow.
Acquisition Cost (AC)
Marketing cost. All the expenses spent on the User flow acquisition.
Contribution Margin (CM)
Contribution margin we get from our User flow. It shows whether we sell our goods and services well or not. It is the basic value that determines the effectiveness of our decisions. It is determined by the formula CM = UA x (ARPU — CPA) = UA x (ARPC x C1 — CPA).
Return on sales of goods and services. It is determined by the formula Revenue = B x AvP x APC
Return on Marketing Investment (ROMI)
Return on marketing investment. It shows how effectively we worked out the marketing budget. It is determined by the formula ROMI = CM / AC
Gross Profit Margin (GPM)
GPM is a value that defines the share of COGS in the total turnover. It is determined by the formula GPM = CM / Revenue.
User acquisition for lead (UAL)
The flow of attracted Users for the mixed model. These Users convert not to customers but to leads that we sell our clients.
Conversion for lead (CL)
Index of conversion from User to lead.
The number of leads we sell.
Sale Price (SP)
Price for the lead sale.
Number of Sale (NS)
Number of sale shows how many times we can sell a lead. In some models you can sell one lead to different clients and earn more money.
Average Payment Count for lead (APCL)
Average number of requests for service made by one lead.
Cost Per Acquisition for lead (CPAL)
Expenses we bear for the User that we are going to convert to lead.
Acquisition Cost for lead (ACL)
Marketing budget spent on attracting Users who will be converted to leads.
Inventory Release (IR)
The percentage of bought out leads. In some cases we cannot sell all the leads that we got.
Cost of Good Sold for lead (COGSL)
Expenses we bear for getting leads that our client buys.