Customers and pricing
Unit economics
The revenue and cost of one unit: one product, order or customer.
Last reviewedWhat does Unit economics mean?
Unit economics looks at the revenue and costs linked to one unit of the business, such as one order, one store or one customer. For a subscription business, the key test is whether customer lifetime value is well above customer acquisition cost. If each unit loses money, growing faster makes the losses bigger.
Where does it come up in case interview prep?
- Unit economics in any businessLesson in How industries work: the toolkit
- Fixed and variable costs, operating leverage, and unit economicsLesson in Business basics for non-business learners
- Store economics: the numbers that decide profitLesson in Retail
- How e-commerce and marketplaces make moneyLesson in E-commerce, marketplaces, and quick commerce
- Order economics: last mile, dark stores, and returnsLesson in E-commerce, marketplaces, and quick commerce
- Restaurant unit economics: turns, delivery, and franchisingLesson in Restaurants and food service
- RevPAR and hotel economicsLesson in Hotels and travel
- Airline unit economics: RASK, CASK, load factor, fuel, and leasingLesson in Airlines, airports, and aircraft leasing
- Unit economicsFramework: how to use it in a case
Related terms
- CAC (customer acquisition cost)What it costs, on average, to win one new customer.
- CLV (customer lifetime value)The profit a customer is expected to bring over the whole relationship.
- ContributionWhat each sale adds after its own variable cost.
- TAM, SAM and SOMTotal market, the part you can serve, and the part you can win.
- Market shareOur sales as a share of total market sales.
- Relative market shareOur share divided by the largest competitor's share.
- Penetration rateThe share of potential customers who already use the product.
- Share of walletOur share of what one customer spends in the category.