Question

If the average acquisition cost of a Highly Satisfied User is $1080, Average Revenue is $600/year with a UCM of 60%, how many years would Starbucks have to keep such a customer running at the Average Revenue Spend to break-even on the acquisition cost?

Answer 1

Answer:

Break even point will be 3 years

Explanation:

We have given acquisition cost = $1080

Average revenue = $600

And UCM, that is margin is 60 % of revenue

So margin $=\frac{600\times 60}{100}=360$

We have to find the break even point on the acquisition cost

Break even point is given by

$break\ even\ point=\frac{acquisition\ cost}{margin}=\frac{1080}{360}=3years$

So break even point will be 3 years