New customer acquisition strategy

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

	Action		Factor		Marketing tactic
example	1	increase 13-24 month rebuy rate to 28%			Offer a 25% off promotion via email to this customer group
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					use a much space as you’d like.
2019
	Customers beginning	Rebuy rate	Customer	orders per customer	Orders	Ave order	sales
Active buyers	2,500,000	56%	1,400,000	5.0	7,000,000	$ 135.00	$ 945,000,000
13-24 mo buyers	1,000,000	23%	230,000	2.0	460,000	$ 125.00	$ 57,500,000
24 + buyers	1,500,000	11%	165,000	2.0	330,000	$ 125.00	$ 41,250,000
New customers			900,000	1.5	1,350,000	$ 110.00	$ 148,500,000
	5,000,000		2,695,000	3.4	9,140,000	$ 130.44	$ 1,192,250,000	100%

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