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Once I read this comment, I think it clicked. The result of what we calculated is customer acquisition cost. But, we were trying to figure out if T-shirts were
by bretthardin 14y ago
Once I read this comment, I think it clicked. The result of what we calculated is customer acquisition cost. But, we were trying to figure out if T-shirts were worth the upfront cost. I am not a marketer, so I am 100% sure I am confused by the terminology.
- loumf 14y agoTo get ROI, you need to also know the value of a customer. If each customer pays 2 x Customer Acquisition cost in the first month, then the ROI is 2 in the first month. If it's a subscription, and 100% stay for a year, then it's 24 (or 2400%) in the first year. Pro-ROI calculations take into account the time-value of money and taxes.
- hammock 14y agoYou have calculated Cost per Acquisition. ROI would be (Income / Investment - 1). To get to ROI from CPA, just divide it into your Customer Lifetime Value. I.e. if you think a conversion is worth, on average, $40 over the life of their relationship with your company, then your return would be 40 / 19.05 -1 = 110% or roughly 2-to-1.