Consumer companies depend on the relationship between customer lifetime value and acquisition cost, brand and channel. Across all sectors, unit economics, retention, capital needs and time to revenue are the questions that travel.
12 min read · Level 4
Having worked through several sectors, I think the most valuable lesson is that the general questions are the same everywhere and the answers differ completely. Unit economics, retention, capital needs, time to revenue and protection apply to a SaaS company, a biotech and a consumer brand alike. Knowing which metric carries each of those questions in a given sector is what a sector lens really is.
Consumer. Consumer brands and apps are judged on whether customers are worth more than they cost to win.
Average monthly gross profit per customer 20 Monthly churn 5% Average customer lifetime 1 / 5% = 20 months Lifetime value (LTV) 20 x 20 = 400 Customer acquisition cost (CAC) 150 LTV to CAC ratio 400 / 150 = about 2.7
Other consumer-specific questions:
Channel dependence reliance on one advertising platform or retailer Brand whether customers return without paid prompting Repeat purchase share of revenue from existing customers Trend risk demand driven by a passing fashion
If advertising costs rise and CAC doubles to 300, the LTV to CAC ratio falls to about 1.3, and growth may become barely profitable.
What generalises across sectors.
Question Applies to Do unit economics work all sectors Do customers stay and expand all sectors How much capital before profitability all sectors, varies widely How long to meaningful revenue all sectors, varies widely What protects the business from competitors all sectors
What does not generalise. The specific metric that matters most, acceptable margins, typical timelines, regulatory gates and the expertise needed to judge technical claims.
Because consumer businesses can grow quickly on paid acquisition and then stall when costs rise or channels change, and those dynamics are visible in unit economics before they show in revenue.
The generalisable questions give a common starting point for any sector, while the sector-specific lenses prevent applying the wrong benchmark.
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A direct-to-consumer brand relying on one ad platform.
Period CAC LTV LTV to CAC Year 1 150 400 about 2.7 Year 2 300 400 about 1.3
A change in advertising costs doubled acquisition cost. Revenue growth continued for a time because the company kept spending, but each new customer now barely covered its cost. The company had to cut marketing sharply, and growth stopped.
Evaluating consumer companies on revenue growth without examining lifetime value, acquisition cost and dependence on a single marketing channel.
Estimate lifetime gross profit per customer and compare with acquisition cost.
Ask what share of customers come from one platform or retailer, and model a doubling of its cost.
Check how many customers return without paid prompting.
Start with unit economics, retention, capital and time to revenue, then add the metrics specific to the sector.
When evaluating consumer brands and apps, and as a checklist for any sector.
Do not apply a single LTV to CAC benchmark rigidly across all business models; acceptable ratios depend on margins, payback periods and capital costs.
Reporting on direct-to-consumer companies in the early 2020s widely described rising online advertising costs and changes to mobile ad tracking, including Apple's App Tracking Transparency introduced in 2021, raising customer acquisition costs and pressuring companies that had grown mainly through paid social advertising.
Model what happens to unit economics if the main acquisition channel becomes much more expensive.
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