How To Calculate Cost of Acquisition Payback in SAP4Hana | Arithmix

Calculating the cost of acquisition payback is an essential part of any business strategy. It helps you determine the amount of time it will take for your investment to pay off. In simple terms, it is the length of time it takes for the revenue generated by a customer to cover the cost of acquiring that customer. In this article, we will discuss how to calculate the cost of acquisition payback and why it is valuable to do so.

What Is Cost of Acquisition Payback?

The cost of acquisition payback is the amount of time it takes for a business to recover the cost of acquiring a new customer. This cost includes all the expenses incurred in acquiring the customer, such as marketing, advertising, and sales costs. The cost of acquisition payback is an important metric for businesses because it helps them determine the effectiveness of their marketing and sales efforts.

Calculating the cost of acquisition payback is relatively simple. You need to divide the total cost of acquiring a customer by the revenue generated by that customer. For example, if it costs $100 to acquire a customer and that customer generates $50 in revenue per month, the cost of acquisition payback would be two months.

When Is It Valuable To Calculate Cost of Acquisition Payback?

Calculating the cost of acquisition payback is valuable for businesses in several ways. Firstly, it helps businesses determine the effectiveness of their marketing and sales efforts. If the cost of acquisition payback is too high, it may indicate that the business needs to re-evaluate its marketing and sales strategies.

Secondly, the cost of acquisition payback can help businesses make informed decisions about their investments. If the cost of acquisition payback is too long, it may not be worth investing in that particular customer segment. On the other hand, if the cost of acquisition payback is short, it may be worth investing more in that segment.

Finally, the cost of acquisition payback can help businesses determine the lifetime value of a customer. By understanding how long it takes to recover the cost of acquiring a customer, businesses can determine how much revenue that customer is likely to generate over their lifetime. This information can be used to make informed decisions about customer retention and acquisition strategies.

In conclusion, calculating the cost of acquisition payback is an important metric for businesses. It helps them determine the effectiveness of their marketing and sales efforts, make informed decisions about their investments, and understand the lifetime value of their customers. By calculating the cost of acquisition payback, businesses can make more informed decisions and improve their overall profitability.

How Do You Calculate Cost of Acquisition Payback in SAP4Hana

SAP4Hana itself isn’t naturally geared towards letting you calculate complex metrics like Cost of Acquisition Payback. As an alternative, teams typically use products like Arithmix to import data from SAP4Hana and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like SAP4Hana, combine it with data from other systems, and create calculations like Cost of Acquisition Payback.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Cost of Acquisition Payback in Arithmix

Calculating metrics like Cost of Acquisition Payback is simple in Arithmix. Once you've created your free account, you’ll be able to import your SAP4Hana data, and use it to create natural language formulas for metrics like Cost of Acquisition Payback.

Arithmix is designed to give you the power to build any calculations you want on top of your SAP4Hana data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.