Prof. Wilson has decided to open a snowcone shop in Westwood. The great thing ab

Question

Prof. Wilson has decided to open a snowcone shop in Westwood. The great thing about the snowcone business is that it has an average of a 75% gross margin on all sales. Prof. Wilson plans to tell all of his students about the shop during all of his classes when they have no choice but to listen to him. He expects that half of his traffic will come from his students. The average customer spends $40 per month on snowcones, and will eat snowcones for two months before getting sick of them and never coming back. Prof. Wilson also plans to buy Facebook Ads targeting young professionals who like snowcones and work in Westwood. He estimates that it will take an average of $20 of Facebook ads to attract each customer via ads. What is the average CAC for his business idea?

Explanation / Answer

Cost of Facebook ads / Customer Acquisition = $20

Also, Half of the traffic would come from students

Hence , Average Customer Acqusition cost would be $10 ($20/2)

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