Marketing may attract customers while the first sale fails to cover acquisition costs. Sometimes a business expects repeat orders to recover the investment. To assess that model, you need to know how much a customer contributes, when the money arrives and which costs still lie ahead.
Start with one cohort of new customers acquired during a defined period. This lets you connect their first and repeat purchases without mixing them with sales from an established customer base.
Record which acquisition costs you include:
Show one-off costs separately and explain how you allocate them across periods. Include retention costs when assessing repeat sales. The same amount must not enter the model twice.
A small test and an annual programme will have different calculation scopes. Compare consistent metrics and avoid changing cost definitions to make the result look better. Basic measures are covered in the article on ROAS, CPL and customer acquisition cost.
Subtract product or service delivery costs from purchase revenue, along with other variable costs: payment fees, subsidised delivery, packaging, discounts and expected return losses. Do not subtract them again if they are already included in the starting amount.
The resulting contribution goes towards acquisition, fixed costs and profit. It is not the company's net profit.
Use a consistent basis: one currency and a common treatment of taxes and returns. For a service, include the work needed to deliver it, even when the owner currently performs some of it without separate pay.
Track cohorts acquired in the same period: how many buy again, how soon and with what contribution. Compare cohorts with the same observation window. Last year's customers have had more time to buy again than last month's.
Google's guidance on estimating conversion value considers margin, the transition from enquiry to sale and repeat business. For a management model, validate these inputs with your own history rather than copying another business's example.
If there is no history, show a scenario without repeat purchases and a separate scenario with assumptions. Expected income over several years should not become a reason to increase spending immediately.
Suppose acquiring 100 new customers costs €4,000. The total acquisition cost per customer within this model is €40.
Each first order generates €100 in revenue and contributes €30 after all variable costs. First-purchase contribution is 100 × 30 = €3,000. After acquisition spending, the cohort still has a €1,000 shortfall.
Over the next six months, 40 customers place one repeat order each. Each also contributes €30, while separate retention spending for this cohort is €200.
The calculation for the selected period is:
In this hypothetical example, the cohort has covered the listed costs. Fixed costs and profit are still not covered. If only 20 customers buy again, the remainder is 3,000 + 600 − 4,200 = −€600.
The calculation describes the economics of the cohort being tracked. By itself, it does not prove that marketing generated all those purchases as additional sales: that requires a separate incrementality study.
To assess payback over time, review cumulative contribution by month and payment dates. A six-month total does not tell you exactly when it covered the costs: in month three or only at the end of month six.
Account for advances, instalments, payment terms and refunds. An economically acceptable model can create a cash shortfall when marketing is paid for now and the customer pays later.
Scaling requires enough cash to cover the waiting period. The process for changing spending is covered in the article on controlling acquisition cost as the budget increases.
To connect economics, the audience and channel selection, discuss the task through our market research and strategy service. Prepare cost, first-sale and repeat-purchase data for comparable periods.