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Customer Acquisition ROI Ratio measures the return on investment (ROI) from the money spent on acquiring new customers. It compares the revenue generated from new customers against the cost of acquiring them, helping businesses understand the profitability of their customer acquisition efforts.
Synonyms: Customer Acquisition Return on Investment Ratio, Customer Acquisition ROI, Customer Acquisition Profitability Ratio, Customer Acquisition Return Ratio
The ratio is calculated by dividing the revenue earned from new customers by the total cost spent on acquiring those customers. A ratio above 1 means the business is earning more than it spends, while a ratio below 1 indicates a loss on acquisition efforts.
Tracking this ratio helps businesses decide if their marketing and sales strategies are cost-effective. It highlights which campaigns bring in profitable customers and which ones need adjustment or discontinuation.
If a company spends $10,000 on marketing and gains $30,000 in revenue from new customers, the ROI ratio is 3. This means for every dollar spent, the company earns three dollars back. Conversely, spending $10,000 and earning $5,000 results in a 0.5 ratio, signaling a need to rethink acquisition tactics.
