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Cost of Customer Acquisition

Definition

Adding up all the spending to get a new customer, from ads to sales efforts. Knowing this cost helps decide if the money spent is worth it.

What to consider

  • Use historical data for accuracy.
  • Focus on strategies to improve retention.
  • Compare lifetime value across customer segments.

Real world scenarios

  • A software company estimates that each customer will generate $1,200 over three years through subscriptions and upgrades.
  • An online retailer calculates lifetime value by analyzing repeat purchase behavior.
  • A gym evaluates membership longevity and additional service usage to determine customer value.

Related terms

Business Grants
Freelance
Business Overhead
Small Business Administration (SBA)
Net Operating Income

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