I show you how to correctly calculate the CAC payback period for a subscription business using cohort analysis. Free model download included if you want to plug in your own numbers.
➡️ Book a demo with Ordergroove to take your customer retention and recurring revenue to the next level ► https://www.ordergroove.com/eric/ (use this link or mention me to be eligible for 10% off your annual contract)
In this video, we walk through how to use customer cohorts to understand the real payback period calculation for a subscription-enabled eCommerce (subscription box business) & SaaS startup.
In my experience, 99% of founders calculate their CAC payback incorrectly, because they think about it on a 1-customer basis, and they don't incorporate customer churn and declining retention into their model of how the initial customer acquisition gets paid back.
In this video I will show you how to use your unit economics & customer cohorts to very accurately calculate this metric!
SECTIONS:
0:23 who's this video for and why does it matter (any business selling on a subscription)
1:17 overview of definitions (CAC, gross profit, CAC payback period, customer cohort)
3:19 unit economics setup and the classic miscalculation of CAC payback
4:00 why this traditional calculation of CAC payback is totally incorrect
5:26 CAC payback period calculation case study - eComm business with high churn rate
9:34 book a demo with Ordergroove https://www.ordergroove.com/eric/
10:27 CAC payback period calculation case study - SaaS business with low churn rate
If you have questions - leave a comment below and I'll try to help. Cheers!