What is meant by 'unit economics' in a business context?

Unit economics refers to the financial performance of a business on a per-unit basis, focusing primarily on the profit or loss generated per unit, which in most cases relates to individual customers. Understanding unit economics is essential because it gives businesses the ability to analyze how much value each customer brings to the company and how much it costs to acquire and serve that customer. Specifically, it involves calculating metrics such as customer lifetime value (CLTV) against customer acquisition cost (CAC).

By honing in on the profit or loss per customer, businesses can make informed decisions about pricing strategies, marketing expenses, and overall business sustainability. This insight helps to evaluate whether a business model is viable, enabling startups to scale effectively while maintaining profitability.

The other options described do not encompass the broader perspective that unit economics provides. While customer retention, monthly income from new users, and average acquisition costs are all important metrics, they do not directly reflect the overall financial health per customer, which is the crux of understanding unit economics.