Problem
Calculate Customer Acquisition Cost (CAC) using information given below.
1. Assume you use Google AdWords for advertisement. The fee is $0.30 per click. You got 20,000 people visited your website using Google AdWords
2. Among 20,000 people, 10% of the people took the free trial. The cost for the trial is $10 for each person.
3. Among those who took the trial, only 5% paid for the product.
4. How much did you spent for getting one NEW customer?
Calculate Customer Lifetime Value (CLV) using information given below.
NOTE: You should consider annual discount rate in this calculation.
1. Expected annual contribution margin is $100 as long as customer keeps relationship with the company.
2. Churn rate of customer is 30% per year
3. Annual discount rate is 10% per year
4. Company spends $30 to acquire one customer.