If CAC is $200 and gross margin per customer per period is $50, how many periods are needed to recover CAC?

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Multiple Choice

If CAC is $200 and gross margin per customer per period is $50, how many periods are needed to recover CAC?

Explanation:
Concept: payback period for customer acquisition cost. You recover CAC with the ongoing gross margin per period, so the needed number of periods is CAC divided by the margin per period. Here, CAC is two hundred dollars and the per-period margin is fifty dollars, so two hundred divided by fifty equals four. Therefore, it takes four periods to recover CAC. Since the division is exact, you don’t need partial periods.

Concept: payback period for customer acquisition cost. You recover CAC with the ongoing gross margin per period, so the needed number of periods is CAC divided by the margin per period. Here, CAC is two hundred dollars and the per-period margin is fifty dollars, so two hundred divided by fifty equals four. Therefore, it takes four periods to recover CAC. Since the division is exact, you don’t need partial periods.

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