Unit economics per client

In card #92, we explored unit economics for a single transaction. However, the true power of unit economics lies in its ability to calculate the economics of all transactions for a single customer.

Since we have one customer, we spend money on them throughout their entire lifetime with the product, and this is called CLTC. 

Each transaction, as we recall, consists of the average order value and costs: AOV and COGS. A customer makes T transactions, while an average customer makes APC transactions. 

Thus, gross profit is calculated as CLTV = (AOV – COGS) × APC, and contribution margin is CM = CLTV – CLTC.

The customer’s gross profit is called CLTV because we now take the gross profit value from all of the customer’s transactions, not just one, as before.