When evaluating a business, it is necessary to take into account such an important indicator as marginal profit. Analysis of this metric allows you to understand whether the sale of a product brings it and reveals what earnings the company receives when selling a unit. The indicator is calculated using the formula:
CM = (ARPU – CPA) * UA
A door sales company receives an twitter database average income of 20,000 rubles per person. It costs 2,000 rubles to find one, and a total of 100 clients were attracted as part of the advertising campaign. Let's look at the company's marginal profit:
CM = (20,000 – 2,000) * 100 = 1,800,000 rub.
This indicator helps to understand whether the business is profitable or unprofitable.
What to do if it turns out that the enterprise is operating at a loss or does not reach the desired level of profit? You can try to take the following actions:
Reduce the cost of the product.
Increase the average bill.
Stop using unprofitable advertising channels.
Reduce the number of purchases per customer.
It is necessary to monitor the indicators over a long period. Analyzing the data over a short period may be inaccurate and lead to irrational decisions.
How to achieve multiple growth in traffic and sales from your website?
Alexey Boyarkin
Dmitry Svistunov
Head of SEO and Development
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I have always been concerned about the issue of moving to a fundamentally new level. So that the indicators would grow not by 2 or 3 times, but by several orders of magnitude. From a thousand visits to ten thousand or from ten thousand to a hundred thousand, if we are talking about a website, for example.
And I know that such leaps are always the result of painstaking work in five areas:
Technical condition of the site.
SEO.
Collection of site semantics.
Creating useful content.
Working on conversion.
And at the same time, every manager needs an increase in sales and the number of applications from the site at the moment.
To get this growth, download our step-by-step template for increasing sales from the site:
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Unit Economics Metrics with Formulas
Metrics Transcript Meaning Formula
CAC Customer Acquisition Cost Cost of attracting one client CAC = AC / B
CPR Cost Per Registration Registration cost CPR = AC channel / Number of registrations from this channel
ARPC Average Revenue Per Customer Average revenue per customer ARPC = (AvP – COGS) * APC – 1COGS
ARPU Average Revenue Per User Average revenue per user
ARPU = ARPC * C1;
ARPU = R / UA
ARPU including advertising Average Revenue Per User Average revenue per user including advertising costs ARPU including advertising = ARPU – CPA
ARPPU Average Revenue Per Paying User Revenue from one paying user
ARPPU = ARPU / C1;
ARPPU = APC * AvP
ARPA Average Revenue Per Account Average revenue per registered user ARPA = R / Number of accounts
LTV Lifetime Value Total profit per client LTV = Revenue from one client for the entire period / (CAC + ARC)
APC Average Payment Count Average number of purchases per customer APC = Average Order Quantity / B
CPA Cost Per Acquisition Cost of attracting one user CPA = AC / UA
CV or C Conversion Rate Conversion C = (B / Number of visitors) * 100%
C1 Conversion to first purchase Conversion to first purchase C = (First-time buyers / Number of visitors) * 100%
CM Contribution Margin Marginal profit CM = (ARPU – CAC) * UA
UA User Acquisition Attracted users -
COGS Cost of a Good Sale Cost of goods sold COGS = Total variable costs for the period excluding marketing
1COGS (1sCOGS) First Sale COGS All costs for the first purchase 1COGS = Amount of additional costs on first sale
Fix COGS Fixed business expenses Fix COGS = Total fixed costs of the company
OE Operating Expenses Operating expenses OE = OR for the period / Cash from sales
ARC Average Retention Cost Average customer retention costs ARC = Visitor Retention Budget / Number of Customers
ACS Average Customer Service Average cost of customer service per month ACS = Total Customer Service Costs / B
ACV Annual Contract Value Annual contract value