| The CMO for Pete’s Brew is planning his Q3 new customer acquisition strategy. She has collected information on last years new customer acquisition historical performance (below). | ||||||||||
| The CFO has given her guidelines that new customers should have a present value that pays back the initial acquisition investment in a minimum of 2 years | ||||||||||
| Based upon last years performance which channels are achieving the financial goals? This requires you to calculate cost per acquisition and LTV of future income | ||||||||||
| Which channels do you recommend that the CMO expand? Which should be cut back? | ||||||||||
| Last year total advertising spent in Q3 was $140,000. This year budget is $175,000 … allocate the $175,000 budget across the 3 channels | ||||||||||
| explain the rationale behind your allocation: | ||||||||||
| Last year Q3 prospecting performance | ||||||||||
| Facebook ad buy | Google search ads | Direct mail | ||||||||
| impressions | 20,000,000 | impressions | 5,000,000 | Circulation | 100,000 | |||||
| Clicks | 100,000 | Clicks | 70,000 | |||||||
| orders (conversions) | 1000 | orders (conversions) | 1000 | orders (conversions) | 1200 | |||||
| media cost (cost per 1000 impressions ) | $ 2.00 | media cost (cost per click ) | $ 0.50 | media cost (cost per piece ) | $ 0.65 | |||||
| Gross profit % | 50% | Gross profit % | 50% | Gross profit % | 50% | |||||
| variable cost per order | $5.00 | variable cost per order | $5.00 | variable cost per order | $5.00 | |||||
| Average order value | $ 50.00 | Average order value | $ 60.00 | Average order value | $ 70.00 | |||||
| subsequent value from new customer acquisition | subsequent value from new customer acquisition | subsequent value from new customer acquisition | ||||||||
| year 1 | $ 11.00 | year 1 | $ 13.00 | year 1 | $ 15.00 | change to $18 | ||||
| year 2 | $ 7.00 | year 2 | $ 8.00 | year 2 | $ 10.00 | |||||
| year 3 | $ 5.00 | year 3 | $ 5.00 | year 3 | $ 5.00 | |||||
| year 4 | $ 3.00 | year 4 | $ 3.00 | year 4 | $ 3.00 | |||||
| discount rate 8% | 8.0% | discount rate 8% | 8.0% | discount rate 8% | 8.0% | |||||
| Total | ||||||||||
| Q3 2017 budget | $ 175,000 | |||||||||
| Below is great place for calculating CPA and NPV … LTV | 0 | |||||||||
