Ch 23: Building Your Own AI Products - Intermediate¶
Track: Advanced | Try code in Playground | Back to chapter overview
Read online or run locally
You can read this content here on the web. To run the code interactively, either use the Playground or clone the repo and open chapters/chapter-23-building-your-own-ai-products/notebooks/02_unit_economics.ipynb in Jupyter.
Chapter 23: Building AI Products — Notebook 02 (Unit Economics)¶
A product is a business only if the unit economics work. We model lifetime value, acquisition cost, their ratio, and the payback period that gates growth.
What you'll learn¶
| Topic | Section |
|---|---|
| Lifetime value (LTV) | §1 |
| Customer acquisition cost (CAC) | §2 |
| LTV:CAC ratio and payback | §3 |
Time estimate: 3 hours
Key concepts¶
- LTV — total gross margin a customer generates before churning.
- CAC — fully-loaded cost to acquire one customer.
- LTV:CAC >= 3 — a common bar for a healthy business.
- Payback — months to recoup CAC; shorter means faster, safer growth.
LTV, CAC, their ratio, and payback period decide whether a product is a business. Churn drives LTV, so retention is where the economics are usually won or lost.
Run the full notebook in the chapter folder for code and outputs.
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