3.What is the Online Retail Formula?The online retail math formula describes the ratio of your Customer Acquisition Cost (CAC) to your (LTV). At its simplest, you want your formula to look like this:Keep your Customer Acquisition Cost (CAC) below your Customer Lifetime Value (LTV).Which makes sense; that’s basic retail math. Of course you want to pay less for your customers than you make from them. The tricky part is breaking the formula down, and using the insights you gain in an actionable way.
First, let’s discuss why you should care about this formula, then we’ll break the formula down to examine the parts.Why is the Online Retail Formula Important?Sure, you can have a rough idea of what you spend and what you make back without having to do the retail math, but there are tangible reasons to sit down and make this formula work for your business. Business & Marketing Reasons for the Online Retail FormulaThe online retail formula isn’t just a matter of figuring out if your CAC is lower than your LTV. The difference between your CAC and LTV will inform you of how you should adjust your marketing spending.The larger your business grows, the more important the retail math formula becomes; you won’t always be able to use rough estimates. Once you start looking into how large and how quickly you can scale, you will want to know if, and by how much, you can increase your acquisition spending without going into the red.On the opposite end of that, you might find out that your CAC is too much lower than your LTV, meaning you aren’t spending enough on your customers.“The ideal CAC:LTV ratio is different for every industry, but the comfortable range is between 1:3 and 1:5. A ratio of 1:6+ is even better.“ 1:6 and up means your customer loyalty program is working brilliantly, your customer experience is near perfect, and overall you’ve honed and optimized your site just right. You should also consider that LTV is based on the average customer. If Apple started selling items that only 1% of the population could afford, their average LTV would be enormous; probably much higher than their CAC.
Supermarket Math Formulas
However, it would be because the target group is smaller; not because they’re making more money. Deeper Reasons for the Online Retail FormulaSolving this formula for your business gives you more than your CAC:LTV ratio. The variables you’ll need to define as you start piecing it together (Cost Per Visit, Gross Margin, Frequency, etc.) are valuable to be aware of as well.The process of solving this formula will change the way you look at your business, leading to a more customer-centric model for this customer-centric market. Breaking Down the Online Retail FormulaThere are five Key Performance Indicators (KPIs) successful e-commerce companies look at to determine CAC and LTV:Customer Acquisition Cost:. Cost Per Visit (CPV). Conversion Rate (CR)Customer Lifetime Value:. Average Order Value (AOV).
Average Purchase Frequency (F). Gross Margin (GM)How to Find Your Customer Acquisition Cost (CAC)Your CAC is the total average cost to acquire and keep a customer for your business.Find your customer acquisition cost by dividing your Cost Per Visit (CPV) by your Conversion Rate (CR). (In this formula, we’re defining a conversion as the move from visitor to customer).CAC = CPV / CRHow to find your Cost Per Visit (CPV)CPV = Total Marketing Costs (acquisition and retention) / Volume of VisitsHow to find your Conversion Rate (CR)CR = Total Number of Customers / Total Number of VisitorsOne thing to make very clear here about finding your CPV: retention marketing is part of your total marketing costs.
/ / Retail math formulas Retail Math Formulas NewName: Retail math formulasFile size: 293 mbLanguage:CRC: 00b9cdec8284dd20cfea94ecd919f3a8Rating: 5/10As a decision maker at an e-commerce company, there's all sorts of retail math formulas you have to do to make sure everything is running as it. Below is a break down of the basic math formulas retailers should Net Sales / Average Retail Inventory (Sku Count) = Inventory Turnover.Retail Math — The Formulas You Need to Know. Cost of Goods Sold (COGS) Gross Margin (GM) & Gross Margin Percentage. Gross Margin Return on Investment (GMROI) Percent.
Retail Math Formulas For Excel
Markup & Markup Percentage. Markdown & Markdown Percentage. Stock to Sales Ratio. Sell Thru Percentage. Inventory Turnover Rate. Retail math formulas - Download as Word Doc.doc /.docx), PDF File.pdf), Text File.txt) or read online.Unsuccessful retailers make decisions with their gut. Smart merchants use data.
Get a grip on your business with this quick guide to retail math formulas. Retail Math formulas for the clothing industry to learn about math used by retailers, wholesalers and manufacturers of clothing and apparel.Retail Formulas, Definitions and Examples. KPI Measurement. Expressed As. Average Transaction Value. Gross Sales / Number of. Applying basic math skills is critical in evaluating retail performance.
In this lesson, we will look at a few examples of retail math formulas and.More:.