What is it
Being a good product designer means that one has to know business as well. At the end of the day we, as designers are working in Businesses and we have to know how they operate and the lingo that is used to talk about it
Finance and revenue
- Margin (also known as gross margin) is sales minus the cost of goods sold. For example, if a product sells for $100 and costs $70 to manufacture, its margin is $30. Or, stated as a percentage, the margin percentage is 30% (calculated as the margin divided by sales)
- Life time Value (LTV): value is a prediction of the net profit attributed to the entire future relationship with a customer.
- Customer Acquisition Cost (CAC) is the cost of winning a customer to purchase a product/service. As an important unit economic(*1), customer acquisition costs are often related to customer lifetime value. The CAC can be calculated by simply dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent.
- (*1)Unit economics is defined as the “direct revenues and costs associated with a particular business model, and are specifically expressed on a per unit basis”.