Business Metrics and Unit Economics Questions

Evaluate a candidates ability to analyze the financial drivers and per customer economics that determine business sustainability and growth. Core concepts include revenue streams and pricing, gross margin, contribution margin, operating margin, customer acquisition cost, lifetime value per customer, lifetime value to customer acquisition cost ratio, payback period, average revenue per user, churn and retention rates, and metrics for subscription or recurring revenue models such as annual recurring revenue, monthly recurring revenue, expansion revenue, and contraction effects. Candidates should be able to perform back of the envelope calculations and sensitivity analysis, interpret trade offs between growth and profitability, link marketing product and channel activities to financial outcomes, explain how metrics vary by customer segment or acquisition channel, and make strategic recommendations such as pricing adjustments, segmentation strategies, acquisition channel shifts, or investment versus efficiency decisions. Interviewers may request simple calculations, scenario analysis, and prioritized actions grounded in metric changes.

MediumTechnical

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Given monthly ARPU = $10 and the following retention table for the January cohort:

|month|retention-rate||---:|---:||month0|100%||month1|70%||month2|56%||month3|44.8%|

Calculate the cohort LTV up to month3 and estimate an infinite-horizon LTV by assuming the month3 retention rate persists. Show your steps and assumptions.

MediumTechnical

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Freemium model: 100,000 signups, 2% convert to paid, paid ARPU $50/month, and CAC per signup (paid acquisition cost allocated to signups) = $40. Evaluate unit economics per signup and per paid user, and suggest product or acquisition funnel changes to improve economics with rough math.

EasyTechnical

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Explain CAC payback period. Given CAC = $240 per paid customer, ARPU = $20/month and gross margin = 80%, compute the CAC payback period in months and explain why gross margin matters for payback calculations.

HardTechnical

0 practiced

CFO mandates a 20% improvement in operating margin in 12 months without headcount reductions. As a product manager, propose product-level levers (pricing changes, packaging, automation, cloud cost reduction) and provide rough financial math showing how each lever contributes to margin improvement and risks involved.

MediumTechnical

0 practiced

A new channel delivers lower conversion (1.5%) but higher-LTV customers (LTV $600) vs current channels (conversion 4%, LTV $300). What quantitative criteria—including conversion, LTV, CAC, and scale—would you use to evaluate adding the new channel and to decide budget allocation across channels?

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