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

Break even point will be 3 years

Step-by-step explanation:

We have given acquisition cost = $1080

Average revenue = $600

And UCM, that is margin is 60 % of revenue

So margin
`=(600* 60)/(100)=360`

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

Break even point is given by

`break\ even\ point=(acquisition\ cost)/(margin)=(1080)/(360)=3years`

So break even point will be 3 years