Calculate Incremental Customers for Marketing Spend Justification

Q: Calculate Incremental Customers for Marketing Spend Justification

This question evaluates unit economics and break-even analysis skills, requiring algebraic reasoning about per-customer profit versus fixed and variable marketing costs and is relevant for data scientists analyzing customer acquisition ROI.

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Question

Scenario

You previously computed the per-customer annual profit for a new cardholder (excluding partnership marketing costs) in Question 2. Let:

p = per-customer annual profit from Question 2 (USD per customer per year).
T = the total annual profit target referenced by Question 2 (if Question 2 produced a total annual profit figure; otherwise treat T as that target).

Questions

(a) If an annual campaign with a ride‑sharing partner has a fixed annual cost of $25,000,000, how many incremental cardholders are required to at least break even?

(b) Instead, assume a variable cost of $40 per new customer per year and a one‑time fixed marketing spend of$ 11,800,000. How many new customers are needed so that the initiative’s annual profit equals the annual profit calculated in Question 2 (i.e., equals T)?

Hint: Use the per-customer annual profit from Question 2 (p), and subtract the new variable cost where applicable.

Calculate Incremental Customers for Marketing Spend Justification

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Solution

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Calculate Incremental Customers for Marketing Spend Justification

Overview

Scenario

Questions

Solution

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