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Martin recently graduated from Harvard and decided to start an e-commerce start-up

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Martin recently graduated from Harvard and decided to start an e-commerce start-up. Since Alex picked-up his fathers passion for luxury watches, the start-up is eager to bring the experience of buying high-class watches into the world of online commerce.

After receiving initial positive feedback from the market, Alex decides to hire a digital marketing agency to conduct an online marketing campaign to accelerate customer growth. The agency charges 52,400.00€ for its services.

 

The following information regarding the online campaign conducted is given:

 

Key Metric	Unit	Value
Cost per Mille (CPM)	€	120.00
Click Through Rate (CTR)	%	8.50
Conversion Rate (CVR)	%	0.57

 

 

Five hundred (500) new customers could be acquired. The yearly future retention rate will be constant at 32.00%. The constant average revenue per acquired customer is estimated to be 20,000.00€, and direct cost associated with this revenue are approximately 5,724.00€. The cost of capital for the firm is 15%.

1q) What is the cost per click (CPC)?

2q) What is the cost per conversion?

3q) What is the customer acquisition cost (CAC)?

4q.) What is the customer lifetime value (CLV)?

5q) According to a rule of thumb, for digital marketing campaigns, a good customer lifetime value to customer acquisition cost ratio is about X