Transaction in unit economics

In unit economics, there is the concept of a transaction, which partially defines the formulas and metrics of unit economics. Let’s break it down.

The money paid to us by a customer is called AOV in unit economics because it is averaged across all transactions in the business.

The money we paid to intermediaries from this transaction, for example, to suppliers for goods or to a bank for payment processing, is called COGS. These are also averaged across all transactions in the business. 

The money that remains after subtracting COGS is called gross profit (GP), and from it, we spend money to acquire a customer who makes this transaction – CLTC.

The remainder after all these operations is called contribution margin (CM). 

Thus, GP = AOV – COGS, CM = AOV – COGS – CLTC.