Which formula determines customer acquisition costs?

The formula that determines customer acquisition costs is found by adding marketing expenses and sales expenses, then dividing that total by the number of new customers acquired during a specific period. This approach provides a clear picture of the total expenses directly associated with acquiring new customers, which is essential for evaluating the effectiveness and efficiency of marketing strategies.

This formula is particularly useful because it encompasses all costs involved in the process of attracting new customers, giving businesses insights into how much they are spending to bring each new customer on board. Understanding customer acquisition costs helps companies make informed decisions about budgeting for marketing and sales efforts, ultimately impacting profitability and long-term growth.

In contrast, other options such as calculating sales revenue divided by new customers or using operating expenses in relation to customer retention do not specifically assess the cost-effectiveness of acquiring customers. They provide different financial metrics that may help inform business decisions, but they do not capture the essence of customer acquisition costs.