Chapter 2 · 8 levels
Customers
New versus returning customers, repeat rate, purchase frequency, lifetime value (historic and simple predictive), CAC from marketing spend, LTV:CAC and payback, on Harbor & Pine's buyers.
StartRevenue tells you how much came in. Customer metrics tell you who it came from and whether the business can afford to win the next customer. Every growth plan rests on three questions: how many new customers did we get, how much is a customer worth over time, and what did it cost to get one?
Harbor & Pine is a good place to learn them because its customers come back a lot: four in five buyers have ordered more than once. That makes lifetime value large, and it makes the usual mistakes large too. A cohort that has been around for three years will always look more valuable than one that arrived last spring, and an “LTV of our active customers” is a number about the survivors, not about the people a campaign will bring in.
The chapter uses the track’s house definitions. A booked order is completed or refunded;
lines with quantity <= 0 are data errors and are left out; net revenue is the discounted line
value minus refunds, without shipping. A customer’s first order is their first booked order, and
they are new in the year of that order. Code levels alternate between SQL and pandas. The boss
is the customer economics one-pager the CEO asked for.
Levels
- New or returning?
from Jordan Reyes, Head of Marketing
new customers, returning customers, first order, groupby, transform
- Do they come back?
from Megan Collins, Head of Sales
repeat rate, purchase frequency, orders per customer, count filter, cte
- What a customer has been worth
from Laura Bennett, Head of Finance
ltv, historic ltv, cohort, net revenue, groupby
- A simple predictive LTV
from Andrew Ramos, Marketing Manager
ltv, predictive ltv, aov, purchase frequency, churn, lifespan, margin
- What a new customer costs
from Jordan Reyes, Head of Marketing
cac, blended cac, acquisition, marketing spend, first order
- Metric trap: the LTV of the survivors
from Andrew Ramos, Marketing Manager
survivorship bias, ltv, active customers, metric trap
- LTV:CAC and payback
from Laura Bennett, Head of Finance
ltv cac, payback period, cac, margin, cohort, cte
- Boss: the customer economics one-pager
from Catherine Hale, Chief Executive Officer
new customers, aov, purchase frequency, ltv, segment, reporting