Transaction normalization

Since modern unit economics is based on the fact that one customer can make multiple transactions, which is crucial for calculating target metrics, it’s necessary to learn how to accurately account for different types of payments, such as one-time transactions, bulk payments, or subscriptions, which are essentially payments for multiple transactions in advance.

If a customer pays for multiple transactions in advance that occur periodically in the future, for example, paying for a yearly subscription to a service, in unit economics, such a transaction is typically normalized, meaning it is adjusted to a common time interval for all transactions.

I recommend aligning the normalization of transactions with the periodicity of unit economics cohorts. If your cohorts are monthly, normalize payments to a month; if weekly, normalize to a week. 

For example, for monthly cohorts, a customer payment of 96 received in January becomes 12 payments of 8. Each payment is recorded in the accounting system in the corresponding month, starting from the month of payment.

In addition to payment amounts, costs are also normalized. Each normalized payment is taken into account when calculating the APC value.