Calculation Questions, Answered
Average Retention Cost = Retention Spending ($) / Number of Customers Retained (#) This formula helps businesses determine how much money they spend to keep their customers. To find the average retention cost, you divide the amount of money spent on keeping customers by the number of customers that are still with the company. This …
Break-Even Acquisition Rate = Acquisition Spending / (Initial Margin + CLV) * 100 The Break-Even Acquisition Rate is a way for businesses to figure out how many customers they need to make a profit. It looks at how much money they spend on getting new customers (like advertising and promotions) compared to the amount of …
Prospect Lifetime Value = Acquisition Rate (%) * [Initial Margin ($) + CLV ($)] – Acquisition Spending ($) This equation is used in business or marketing to determine a potential customer’s value over their lifetime. It considers how likely it is for the company to get new customers and how much money they spend on …
Customer Lifetime Value = Margin ($) * (Retention Rate (%) / (1 + Discount Rate (%) – Retention Rate (%)) Customer Lifetime Value is a way to determine how much money a company makes from one customer over their entire relationship. It considers how much profit the company gets per sale, how likely the customer …
Cannibalization Rate = Sales Lost from Existing Products (# or $) / Sales of New Product (# or $) The cannibalization rate is a way for businesses to determine how much they might lose in sales when introducing a new product. It calculates the sales that could be removed from their existing products and given …
Compound Annual Growth Rate = ((Ending Value ($ or #) / Starting Value ($ or #)) ^ (1 / Number of Years)) – 1 Compound Annual Growth Rate (CAGR) is a fancy term used in business and marketing to determine how much something has grown or increased over several years. It helps us understand the …
Projection of Sales = Penetration t (#) * Average Frequency of Purchase (#) * Average Units per Purchase (#) This equation helps businesses and marketers figure out how much they are expected to sell in the future. It considers three important factors: penetration, the percentage of people who will buy their product; average frequency of …
Trial Rate = First-time Triers in Period t (#) / Total Population (#) The trial rate is a way to determine how many people are trying something for the first time compared to the total number of people. We want to know how many people tried a new product in a month. We divide the …
This calculates the number of units you would need to sell to make a profit. Businesses and marketers use an important tool to decide how much money they should spend on advertising or production costs. Break-even analysis helps them determine when their investments will start paying off. What Is Break-Even Analysis Break-even analysis is a …
Marketing as a Percentage of Sales = Marketing Spending ($) / Revenue ($) This calculation helps businesses determine how much money they should spend on marketing. It shows what percentage of their revenue (the total amount of money made) is being spent on marketing. This can help them ensure they’re not overspending or allocating enough …