Channels determine what you can charge for your product (i.e. what the pricing model is).

How Is It Measured?

Two metrics matter the most here:

• LTV - Lifetime Value - how much a customer spends over lifetime
• CAC - Customer Acquisition Cost - how much you spend to get the customer

A good LTV-CAC ratio is 3:1 - i.e. you spend 3 times less than what the customer pays you over a lifetime.

CAC = (total marketing expenses + total sales expenses) / (# of new customer acquired)

The above is a simplified formula - in reality you also need to adjust for sales cycle length, tools and returning customers.

LTV = ARPU / Churn

Of course, in the beginning, it's hard to know the exact churn, so the numbers tend to jump a lot. But because this is one of the central metrics, the work on retention (anti-churn) really pays off. It's the difference between having a bucket that's leaking from the bottom versus one that's overflowing from the top.

Additional Reading

Get Out of the ARPU-CAC Danger Zone with Channel Model Fit - Brian Balfour

Channel Model Fit is simple - channels are determined by your model. First, what do I mean by "Model?" The two most important elements of your model are: How Your Charge - For example, free (monetized with ads), freemium, transactional, free trial, one year up front, etc.&a

www.brianbalfour.com