Customer acquisition cost · printable packet

Acquisition cost is spend attributable to a channel over the new customers it brought; blend channels by totals, include the owner's hours, and read the cost as purchases needed to pay it back.

Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.

1. What you will learn

You will compute what a new customer cost through each channel, blend two channels correctly, put the owner's own hours into the spend, and turn the cost into the number of purchases needed to pay it back.

2. What you already have

You can choose a channel by where the segment decides and compute the contribution one sale makes. This lesson puts the two together: what did it cost to win a customer, and how long before that customer has paid it back?

3. Words for this lesson

4. Spend on top, new customers underneath

$$\text{acquisition cost} = \frac{\text{spend attributable to the channel}}{\text{new customers it brought}}$$

Northside Repairs spent 300 dollars on sponsored forum posts and gained 8 new customers: 37.50 dollars each. It spent 60 dollars printing leaflets tucked into each finished job and gained 4: 15 dollars each. The forum brought twice as many customers and cost two and a half times as much for each.

Term	What it means
Customer acquisition cost	Spend attributable to a channel over the new customers it brought.
Attributable spend	What was spent because of the channel: fees, printing, the owner's hours.
New customer	Someone who had not bought before and came through the channel.
Blended cost	Total spend over total new customers, across several channels.
Contribution	What one purchase adds toward costs: price less the cost of making it.
Payback	The purchases, or weeks, before contribution covers the acquisition cost.

Every error in this figure is an error in the top or the bottom. Revenue on top, meaning what the new customers spent, measures something else entirely. All customers underneath, including regulars who would have come anyway, flatters the channel. The owner's hours left out make channels that need the owner's time, like a craft fair, look free. The hours belong in the spend at the owner's costing rate: the costing-input sense of owner labor, not a wage in the accounts.

Another way: table

Northside Repairs, one season.

Channel	Spend	New customers	Cost each
Forum posts	300	8	37.50
Leaflet with each repair	60	4	15.00
Both, blended	360	12	30.00

Another way: steps

Add up everything spent because of the channel, owner's hours included.
Count only the new customers the channel brought, in the same period.
Divide spend by new customers.
To blend channels, add the spends and the customers, then divide.
Divide the cost by one purchase's contribution to get payback.

5. Blend properly, then ask about payback

To find the cost across both channels, add the spends and add the new customers: 360 ÷ 12 = 30 dollars. Averaging the two per-customer figures gives (37.50 + 15) ÷ 2 = 26.25, which pretends the leaflet brought as many customers as the forum did.

An acquisition cost only means something next to what a customer brings in. Divide it by the contribution one purchase makes, the number from the previous course, to get payback in purchases. A forum customer who costs 37.50 dollars, at 25 dollars of contribution a repair, has paid back after 1.5 repairs; a customer who comes once has not. So a channel is not 'expensive' or 'cheap' on its own. It is expensive for customers who buy once and cheap for customers who return, which is why retention, at the end of this course, decides whether acquisition was worth it.

6. The method, step by step, and how to check it

Fix the period. One season, one month, one campaign: the spend and the customers must come from the same stretch of time.

Add up the attributable spend. Fees, printing, samples given away, travel, and the owner's hours at the costing rate. Leave out costs that would have been paid anyway, such as rent.

Count the new customers. Only people who had not bought before and who came through this channel, from the 'how did you hear about us?' record.

Blend if needed. Add every channel's spend, add every channel's new customers, and divide once.

Turn it into payback. Divide the cost by the contribution of one purchase, or one week or month of service.

Check the answer. Multiply the cost back by the new customers: it must give the spend. A blended cost must lie between the cheapest and the dearest channel's cost, never outside. And if a customer would need more purchases to pay back than customers usually make, the channel is losing money however busy it looks.

7. Why each step is allowed

Dividing spend by new customers is allowed because the spend was made to win exactly those customers; sharing it equally among them gives the average cost of one. Some customers were cheaper to win than others, but the average is what the owner pays per customer if the channel is used again on the same terms.

Blending by totals is allowed, and averaging is not, because each channel's cost is itself a share of a total. Adding the totals and dividing once gives every customer equal weight; averaging the two shares gives each channel equal weight, whatever its size.

Putting the owner's hours in is needed because those hours could have been spent on paid work or on another channel. A fair that takes ten hours of the owner's Saturday costs those hours, even though no money changes hands for them.

8. Who counts as new

The bottom of the division is where most acquisition costs go wrong. A busy craft fair brings regulars who come to say hello, people who already follow the shop online and would have ordered anyway, and genuinely new customers. Only the last group was won by the fair.

The simplest way to tell them apart is the business's own records: a customer list, a booking log, or a loyalty card. A name already on the list is not new. Where there is no list, ask at the first purchase, and accept that the answer will be rough. A rough count of new customers is far better than an exact count of everyone, because the exact count answers the wrong question.

9. A high cost can still be a good buy

Acquisition cost on its own does not say whether a channel is worth it. A cleaning client who costs 80 dollars to win and then books a weekly clean for two years, at 40 dollars of contribution each time, repays the channel after two cleans and keeps contributing for a hundred more. A café customer who costs 8 dollars and buys one coffee never pays back at all.

So compare channels on payback and on how often their customers return, not on cost alone. A cheap channel that brings one-time buyers can lose more money than an expensive one that brings loyal ones. The lessons on retention and lifetime value at the end of this course finish the comparison.

10. Payback in weeks or months

For a business whose customers buy on a schedule, payback reads more naturally in time than in purchases. A dog walker whose clients each contribute 15 dollars a week, and who paid 60 dollars to win each one, is paid back after 60 ÷ 15 = 4 weeks. A tutoring service whose families contribute 120 dollars a month, and who paid 90 dollars to win each one, is paid back within the first month.

Time also makes the risk plain. Money spent to win a customer goes out before the contribution comes back, so a long payback ties up cash. A small business with a thin bank balance may prefer a channel that pays back in two weeks over one with a lower cost per customer that pays back in four months, simply because it cannot wait four months. The earlier course's cash timeline is where that comparison is worked through; here it is enough to state payback in the unit customers buy in.

11. Keeping the figures honest over time

Work out acquisition cost every season, channel by channel, and keep the figures in one table so the trend is visible. A cost that creeps up from 12 to 20 dollars over a year is a warning that the channel is wearing out: the same audience has already heard the offer, or competitors have moved into the same space and bid up the price of attention.

Keep the method the same each time. If one season includes the owner's hours and the next does not, the figures cannot be compared, and a channel can look cheaper simply because the counting changed. Write the rule at the top of the table: what goes into spend, who counts as new, and the costing rate for the owner's hours. Then anyone who works the figures, now or later, gets the same answer from the same records.

Finally, look at the counts underneath, not only the costs. A channel that brought two new customers at a very low cost has not yet shown much; one more or one fewer would change its figure sharply. Treat small counts as a reason to keep testing, not as a verdict.

12. In the world: a Minneapolis tutoring service counts its owner's evenings

A tutoring service in Minneapolis ran two channels one fall: paid posts aimed at parents in three school districts, and evening information sessions at a public library, run by the owner. The posts cost 900 dollars and brought 15 new families: 60 dollars each. The library sessions cost only 120 dollars in printing and snacks and brought 12 families, so on paper they cost 10 dollars a family, and the owner was ready to drop the posts.

Then she added her own time. Six evening sessions of three hours each, plus preparation, came to about 24 hours. At the 40 dollars an hour she uses as a costing input, that is 960 dollars, making the library's spend 1,080 dollars and its cost 90 dollars a family, more than the posts.

She did not drop the library. Families from the sessions signed up for longer packages, and the contribution of one month of tutoring was about 120 dollars, so both channels paid back within the first month. But the fuller figure changed her plan: she now runs four sessions instead of six and records the same 'how did you hear about us?' answer for every new family.

13. In the world: acquisition cost in investor reports

Customer acquisition cost is one of the figures investors ask small companies for, often next to how much a customer is worth over time. Lenders and accelerators in the United States commonly look for a channel to pay back its acquisition cost within the first year. The arithmetic they use is the same division as in this lesson.

14. Where this goes wrong

Divide revenue by customers. That is revenue per customer, a different number.

Divide by every customer served. Only the new customers the channel brought belong underneath.

Average the per-channel costs to blend them. Add the spends and the customers, then divide.

The cheapest channel is always the best. Not if its customers never come back; compare payback.

15. Bright Home Cleaning's newspaper advert

16. Neighborhood Kitchen compares a lunch fair with a delivery app

17. Maya puts her hours into a craft fair

18. Your turn: Northside Repairs' forum posts

19. Guided practice

Last season Northside Repairs spent $300$ dollars on sponsored posts on a neighbourhood forum, which brought $8$ new customers, and $60$ dollars on a leaflet handed back with every repair, which brought $4$. Which channel won new customers more cheaply?

20. Guided practice

Complete the worked solution: Neighborhood Kitchen spent $84$ dollars on a stand at a lunch fair, which brought $6$ new customers, and $120$ dollars on delivery-app fees, which brought $4$. Each lunch contributes $6$ dollars. Find what a new customer cost through each channel, and how many lunches an app customer must buy to pay back.

21. Guided practice

Last season Monica's Market Stall spent $150$ dollars on flyers through the doors of three nearby streets, which brought $12$ new customers, and $90$ dollars on a tasting table beside the stall, which brought $18$. Fill in what a new customer cost through each channel, in dollars.

22. Practice

Last season Bright Home Cleaning spent $480$ dollars on an advert in the local paper, which brought $6$ new customers, and $200$ dollars on cards left with two property managers, which brought $4$. Across both channels together, what did a new customer cost, in dollars?

23. Practice

Last season Monica's Market Stall spent $150$ dollars on flyers through the doors of three nearby streets, which brought $12$ new customers, and $90$ dollars on a tasting table beside the stall, which brought $18$. Each purchase contributes $5$ dollars. How many purchases must a customer won through flyers through the doors of three nearby streets make before the channel has paid for them?

24. Practice

A dog-walking business in Atlanta paid $560$ dollars for a featured listing on a neighborhood app, which brought $7$ new clients. Each client contributes $20$ dollars a week. How many weeks before a new client has paid back what it cost to win them?

25. Somewhere new

A channel had spend $s$ dollars attributable to it and brought $n$ new customers. Write the acquisition cost $a$ of one new customer through it.

26. Lesson test

Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.

27. Test question

Maya paid a stall fee of $102$ dollars for a craft fair and spent $11$ hours there, which she costs at $21$ dollars an hour as a costing input. The fair brought $20$ new customers. What did a new customer from the fair cost, in dollars?

28. What you can do now

You can work out what a new customer cost and how many purchases it takes to earn it back. Tell someone why averaging two channels' costs gives the wrong blend. Next: evidence that a channel fits before spending more on it.

Working for the steps left to you

	Cost of a new customer, dollars
flyers through the doors of three nearby streets
a tasting table beside the stall

$\text{a second repair pays it back}$

One-time customers do not.