Revenue Model Flashcards
What are the three primary revenue ‘levers’ to make money?
CAC / Conversion Rate / AOV
What is Customer acquisition cost?
the cost of persuading a potential customer to buy a product on your eCommerce store.
What is CAC Cal?
dividing the cost of acquiring a customer (all marketing cost) by the number of customers acquired in the same period.
What is Conversion Rate?
percentage of visitors to your eCommerce store that bought out of the total number of visitors to the site. Conversion rate optimisation is the series of activities carried out to ensure that more of the current visitors convert with the same traffic.
Average basket size?
measures the average amount spent each time a customer places an order on your eCommerce store. To calculate your store’s basket value, simply divide total revenue by the number of orders in a given period of time. Most eCommerce stores work to increase their basket size through upselling and cross-selling other products.
Why are these three levers important?
When you are looking at any eCommerce business, these three ‘levers’ are what you must know. For example, if you have a great product, but the customer acquisition cost is too high, then you don’t have a business. If your average basket size is very small, that could reduce your opportunity to make a decent margin.
