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Acquisition cost

Acquisition cost, also known as customer acquisition cost, refers to the amount of money a business spends on acquiring a new customer. This cost includes all expenses incurred during the marketing and sales process, such as advertising, promotions, discounts, and sales commissions. Calculating the acquisition cost is important for businesses to assess the effectiveness of their marketing strategies and the return on investment from acquiring new customers. By comparing the acquisition cost with the lifetime value of a customer (the revenue generated from a customer over their entire relationship with the business), businesses can determine the profitability of acquiring new customers. Lowering the acquisition cost can help businesses increase their profit margins and improve their overall marketing efficiency.