E-commerce Glossary

Payback Period

Time needed to recoup a customer's acquisition cost.

Payback Period indicates how long it takes for a customer's cumulative margins to repay their CAC. Formula: Payback Period = CAC / Monthly Margin per Customer. With a $60 CAC and $20 monthly margin, the payback is 3 months. A short payback frees up cash for rapid reinvestment. Beyond 6 months, growth becomes expensive in terms of cash flow.

Related terms

AOV (Average Order Value)Average amount spent per order in your store.See definition ARPU (Average Revenue Per User)Average revenue generated per user over a given period.See definition Blended CACAverage acquisition cost including all marketing channels.See definition Blended ROASOverall return on all advertising spend combined.See definition CAC (Customer Acquisition Cost)Total cost to acquire a new customer.See definition Churn RatePercentage of customers lost over a given period.See definition

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