Which metric is calculated as total marketing spend divided by the number of new customers acquired?

Which metric is calculated as total marketing spend divided by the number of new customers acquired?

• A. Customer Lifetime Value
• B. Return on Ad Spend
• C. Customer Acquisition Cost
• D. Net Promoter Score

Answer: (C)

This item tests the cost efficiency of bringing in new customers. The metric described is CAC, calculated by dividing total marketing spend by the number of new customers acquired. It tells you how much you’re spending to win each new customer, which is crucial for budgeting, pricing, and evaluating marketing strategies. To put it in context, Customer Lifetime Value looks at how much profit a customer will generate over their entire relationship, not how much you spent to get them. Return on Ad Spend compares the revenue generated from ads to the ad spend, focusing on revenue return rather than the direct cost per new customer. Net Promoter Score measures customer loyalty and likelihood to recommend, not acquisition cost. So the equation given specifically captures the cost to acquire a new customer.

This item tests the cost efficiency of bringing in new customers. The metric described is CAC, calculated by dividing total marketing spend by the number of new customers acquired. It tells you how much you’re spending to win each new customer, which is crucial for budgeting, pricing, and evaluating marketing strategies.

To put it in context, Customer Lifetime Value looks at how much profit a customer will generate over their entire relationship, not how much you spent to get them. Return on Ad Spend compares the revenue generated from ads to the ad spend, focusing on revenue return rather than the direct cost per new customer. Net Promoter Score measures customer loyalty and likelihood to recommend, not acquisition cost. So the equation given specifically captures the cost to acquire a new customer.