Should I factor in the customer acquisition cost into my product retail price?

[Xeon]

I've a product, and below is my breakdown of how I come up with the final price that I'm selling to my customers:

1. Product actual cost per unit (including all manufacturing costs etc.) : US$13
2. Warehousing, inventory management and fulfillment cost per unit : US$4 (I'm charged this fee when the fulfillment centre ships out each product for me)
3. My profit markup : US$10.50
4. Estimated planned customer acquisition cost : US$0.50 (meaning, I intend to spend US$0.50 max to acquire 1 new customer)
5. Final selling price of product: US$27.50

Is this how it should be done? Customer acquisition cost should be planned in advanced and factored in as part of the product selling price? I'm confused!

 

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[StevieB]

I've a product, and below is my breakdown of how I come up with the final price that I'm selling to my customers:

1. Product actual cost per unit (including all manufacturing costs etc.) : US$13
2. Warehousing, inventory management and fulfillment cost per unit : US$4 (I'm charged this fee when the fulfillment centre ships out each product for me)
3. My profit markup : US$10.50
4. Estimated planned customer acquisition cost : US$0.50 (meaning, I intend to spend US$0.50 max to acquire 1 new customer)
5. Final selling price of product: US$27.50

Is this how it should be done? Customer acquisition cost should be planned in advanced and factored in as part of the product selling price? I'm confused!

I'm confused why you would only be willing to spend .50 on acquiring new customers when you're making $10.50 profit. Unless it takes significant amount of your time getting each product ready you could spend much more getting new customers and still turn a profit. You also have to consider lifetime value of a customer, repeat customers are much easier than new ones. So even if you spend $12 per customer if their lifetime value is $50 you still come out ahead. Of course that's risky if you don't know the lifetime value.

If it takes little to no time off your hands since you're paying a fulfillment center to get these out why not spend $9 per new customer and make $1.50 and sell thousands more? Then keep those customers in a database and re-sell them.

If you're marketing is turning a profit there's no reason to set a budget. That's like saying I only want to purchase 30 $100 bills for $90. If it's not turning a profit, stop it and test something that will.

 

[amp0193]

Is this how it should be done? Customer acquisition cost should be planned in advanced and factored in as part of the product selling price?

That's how I do it. Give it your best guess as to what the CPA is going to be, and add it into the margin.

It helps to be selling something unique enough to where you can set the price wherever you want it to be.