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In my opinion, customer acquisition cost should be baked into your effective margin calculations. If you're selling things "for a profit", but it costs you mor
by mdorazio 7y ago
In my opinion, customer acquisition cost should be baked into your effective margin calculations. If you're selling things "for a profit", but it costs you more than the entire profit on the sale to make the sale, your business model still sucks and is being subsidized by something, debt or otherwise. This is a common trap online sellers fall into - gross margins are kind of useless if your selling costs are through the roof.
- ghaff 7y agoSee also Blue Apron et al. If you're selling something to a customer base that is almost certainly going to have a lot of churn, that acquisition cost has to be built into your business model. Maybe if churn is low and the main cost is initial acquisition you can sustain losses for a time but not if it's ongoing. ADDED: And a mattress is an example of a product that people buy very rarely so the marketing/advertising to acquire a customer is mostly a cost of a unit sale. Yes, maybe they get some residual word of mouth but it's mostly effectively part of the product cost.