DTC Metrics Explained
A brief glossary on helpful metrics to keep in mind
I put together a “DTC Metrics Playbook” for my teams to help bridge the gap between everyday tasks and our ultimate goals. It explains the metrics we track / should track, why we track them, and how we can move forward based on that data. I’ve included an abbreviated version below, in case helpful to anyone reading.
Every decision —in growth, product, CX, merch, or operations—shapes our core metrics. Understanding these isn't just for finance; it’s essential for smarter decisions and aligned teams.
This playbook clarifies each metric, why it matters, how to use it, and how it connects to our growth. Used effectively, these metrics:
Guide confident, informed spending
Highlight actionable growth levers
Provide early warning signs
Create a shared language across teams
Small optimizations (like improving conversion or AOV) can significantly impact CAC, payback, LTV, and retention. This document should be a compass for making performance-driven, customer-first decisions.
The Member Journey: Funnel View
Customers move through a funnel from their first click to ongoing subscription. Each funnel step influences conversions, costs, and future customer behavior.
The key funnel stages:
Ad Impression → Click
Checkout → First Order
First Experience → Repeat Order
Retention / Churn
Understanding and optimizing each step of this journey is foundational.
Product Metrics
Traffic
Measures sessions to our site
Split between first-time visitors and returning users
Helps us diagnose acquisition efficiency and awareness at the top of funnel
Conversion Rate
% of people who complete checkout ÷ unique visitors
Key driver of CAC
PLP / PDP / Collection Pages
PLP = Product Listing Page
PDP = Product Detail Page
Collection PDPs drive conversions by bundling discovery with decision
Reactivation, Churn and Zombie Metrics
Reactivation
Churned users who return via email or reactivation campaigns
Signals brand affinity even among churned users
Zombie Subscribers
Subscribers with no order in X+ weeks
May have changed preferences
Reactivation via targeted nudges
Marketing Metrics
Spend by Channel
Definition: Total marketing dollars spent, broken down by channel (Meta, Google, Affiliate, Email, etc.)
Why it matters:
Spend efficiency varies greatly by channel. Helps us reallocate dollars based on CAC, and LTV impact
Impressions, Clicks, CTR
Definition: Standard top-of-funnel performance metrics
Impressions: How many times our ads are shown
Clicks: How many times users click
CTR (Click-through Rate):
Clicks / Impressions
Why it matters:
CTR is an early signal of creative and audience resonance. A high CTR + low conversion = landing page problem. Low CTR = creative or audience issue
New Customers by Channel
Definition: Count of net-new paying users, broken down by source
Why it matters:
Allows us to see where our best customers are coming from — not just quantity, but quality (via LTV)
Channel Performance
Definition: Breakout of ad performance by creative (video, static, carousel)
Why it matters:
We scale what performs and cut what doesn’t
Customer Acquisition Cost (CAC)
Definition: The average cost to acquire a new paying customer.
Formula:
CAC = Total paid marketing spend / New customers acquired
What it includes: Paid media (Meta, Google, affiliate), agency fees, creative costs
Why it matters:
CAC is the foundation of our unit economics. It tells us how efficient our growth spend is.
But CAC isn’t fixed — it's affected by:
Conversion rate
Speed and clarity of onboarding
Payment options (e.g., adding Apple Pay can reduce CAC by increasing conversion)
Creative performance and audience quality
Hypothetical Example:
If we improve checkout conversion from 1% → 1.5%, CAC drops ~33%, assuming same spend. That’s a massive gain with zero extra dollars spent.
CAC at 1% Conversion Rate
Customers acquired = 1,000,000 × 1.0% = 10,000 | CAC = $100,000 / 10,000 = $10.00
CAC at 1.5% Conversion Rate
Customers acquired = 1,000,000 × 1.5% = 15,000 | CAC = $100,000 / 15,000 = $6.67
= ($10.00 - $6.67) / $10.00 = 33.3% decrease
Lifetime Value (LTV)
Definition: The total contribution profit expected from a customer over their lifecycle.
Formula:
LTV = Gross margin per order × Expected # of orders within a time period
What affects LTV:
Retention
AOV
Margin
Upsells / repeat purchases
Why it matters:
LTV tells us how valuable a customer is. It justifies how much we can spend to acquire them — and how long we’re willing to wait for payback.
LTV / CAC Ratio
Definition: The ratio of how much value we get from a customer vs. what we spend to acquire them.
Formula:
LTV / CAC (excl. Promos)
Benchmarks:
1.0x = break-even
1.5x = acceptable
3.0x+ = strong performance
Why it matters:
This tells us whether our acquisition strategy is sustainable. Higher CAC can be fine if LTV grows too — but if CAC rises and LTV falls, it is not a great sign
Example:
If CAC jumps from $40 → $55 but AOV and retention are unchanged, our LTV/CAC drops and payback slows — making us less capital efficient.
Payback Period
Definition: The number of months it takes for a customer to “earn back” their CAC through contribution margin.
Why it matters:
Payback tells us how fast we can reinvest growth dollars. If CAC is $50 and we generate $10 in CM per month, payback = 5 months. Shorter payback = faster growth cycles.
How to improve it:
Increase AOV
Improve early retention
Boost gross margin
Lower CAC
Retention Rate
Definition: The % of customers in a cohort who remain active (paying) each month
Why it matters:
Retention is the strongest signal of product-market fit. If people stay subscribed, it means we’re delivering value
Average Order Value (AOV)
Definition: Total revenue ÷ number of orders
Why it matters:
Higher AOV means we make more per shipment, which shortens payback and boosts margin.
How to grow AOV:
Bundle products
Offer upsells at checkout
Raise price (only if value supports it)
Caveat:
Higher AOV isn’t always better. If it reduces order frequency or retention, net impact on LTV may be neutral or negative.
Gross Margin
Definition: Profit per order after subtracting variable costs.
Why it matters:
GM is what pays for fixed costs — and what makes growth profitable
Hypothetical Example:
If your AOV is $40 and GM is 35%, we earn $14 per shipment. If CAC is $110, we need 8 shipments to break even (assuming stable margin + retention).
Churn Rate
Definition: (Subs that unsubscribed / subscribers in prior period)
Measures how many customers stop subscribing each month
Why it matters:
Churn erodes LTV and signals a value gap. High churn → short customer lifecycles → fragile unit economics
Summary
Final Thoughts
Winning in DTC is about relentlessly improving the fundamentals, aligning teams around shared goals, and making every decision data-informed. This playbook gives us the tools and language to do just that.
By understanding how each lever — from conversion to retention to upsell behavior — flows through our metrics, we unlock smarter growth, faster learning loops, and better customer experiences.