Reference
Definitions
Canonical definitions for margin analytics, cost attribution, and unit-economics terminology used across Bear Lumen.
Core Concepts
Fundamental terms for understanding margins and costs.
Customer Margin
Revenue minus variable costs attributable to a specific customer. Shows profitability before fixed costs.
Formula: Customer Margin = Revenue - Variable Costs
Example: If a customer pays $500/month and their AI infrastructure costs $150/month, their margin is $350 (70%).
Cost-to-Serve
The total variable cost of delivering your product or service to one customer, including API costs, compute, and per-customer overhead.
Formula: Cost-to-Serve = (API Costs + Compute + Per-Customer Overhead) / Customer
Example: A customer using 500K tokens/month at $0.03/1K tokens has API cost of $15. Add $5 compute overhead = $20 cost-to-serve.
Usage-Based Pricing
A pricing model where charges are based on actual consumption (tokens, API calls, compute time) rather than flat subscription fees.
Example: Charging $0.10 per 1,000 API calls instead of a flat $50/month subscription. Revenue scales with customer usage.
Profit per Customer
The direct revenues and costs associated with a single customer, used to assess business viability.
Formula: Profit per Customer = LTV - CAC - Cost-to-Serve
Example: Customer LTV of $2,000, CAC of $500, and lifetime cost-to-serve of $800 = $700 profit per customer.
AI-Specific Terms
Terminology specific to AI cost attribution.
Token Cost Attribution
Allocating the cost of LLM API tokens to specific customers based on their actual usage.
Formula: Token Cost = Tokens Used x Cost per Token
Example: Customer uses 1M input tokens at $3/1M and 500K output tokens at $15/1M = $3 + $7.50 = $10.50 total token cost.
Model Economics
The revenue and cost breakdown for a specific AI model (e.g., GPT-4o vs Claude Sonnet), showing margin per model.
Formula: Model Margin = Model Revenue - Model Costs
Example: GPT-4o generates $10K revenue but costs $4K = 60% margin. Claude Sonnet generates $8K revenue at $2K cost = 75% margin.
Common Problems
Issues Bear Lumen helps identify and solve.
Power User Problem
When heavy users on flat-rate pricing consume disproportionate resources, creating negative margins despite appearing profitable.
Example: A $99/month customer using $300/month in API calls has -200% margin. They appear profitable in revenue reports, but the variable cost exceeds revenue.
Revenue Leakage
Uncaptured or undercharged revenue due to billing gaps, reconciliation errors, or pricing model misalignment.
Example: Using a flat rate when usage varies substantially between customers means high-usage customers receive value not captured in pricing.
Assessment Terms
How to evaluate and categorize customer health.
Margin Health
A qualitative assessment of customer profitability, typically categorized as Healthy (>40% margin), At Risk (20-40%), or Unhealthy (<20%).
Example: A customer with 15% margin is "Unhealthy" and should be repriced or upgraded to a higher tier.
Modeling & Simulation
Terms for pricing analysis.
Pricing Scenario
A simulated pricing model applied to historical usage data to project revenue and margin impact before deployment.
Example: Testing a tiered model against current flat-rate shows 15% revenue increase and 20% margin improvement before changing prices.