Cost Per Gross Addition (CPGA)
What Is Cost Per Gross Addition (CPGA)?
Cost per gross expansion (CPGA) is a ratio utilized by companies to evaluate the incremental costs of procuring one new customer.
Cost per gross option (CPGA) is mostly employed by membership based providers and is otherwise called "endorser acquisition cost (SAC)" and "customer acquisition cost (CAC)," and might be abbreviated to "cost per add" or "gross add."
Formula and Calculation of Cost Per Gross Addition (CPGA)
Cost per gross expansion (CPGA) = (Cost of equipment + sales expenses) - equipment revenue/number of new subscribers
- Step 1: Add together the cost of equipment and any sales expenses.
- Step 2: Subtract revenue from the number derived in Step 1.
- Step 3: Divide the number by the number of new supporters.
What Cost Per Gross Addition (CPGA) Can Tell You
To develop and support revenues, companies must increase the number of customers they have on their books. The problem is that getting new clients as a rule includes some significant downfalls that, while possibly not appropriately managed, can wreck profitability.
The cost per gross expansion (CPGA) ratio is utilized to get a grip of how effective a business is at extending its client base and sales reach without eating too much into its bottom line or take-home pay. This is accomplished by counting associated [expenses](/businessexpenses, for example, sales, marketing, equipment discounts, or endowments, and afterward partitioning this sum by the number of new endorsers. What you are effectively left with is a figure showing the amount it costs to get every customer.
How Cost Per Gross Addition (CPGA) Is Used
Frequently, the cost per gross expansion (CPGA) ratio is applied by companies that offer membership based services to clients, for example, remote communication companies, satellite radio companies, and other membership based service providers, like Netflix Inc. (NFLX).
These companies consistently utilize cost per gross expansion (CPGA) values to set their prices and survey whether current measures to win new customers check out and are sufficiently efficient. Investors will study them, too, contrasting cost per gross expansion (CPGA) over a reporting period, either quarter on quarter, or year over year, to lay out who, inside a peer group of comparative companies, is better able to draw in new customers at a lower cost.
In particular, investors will be hoping to check whether the number is decreasing over these time periods. Assuming that it is, this could be an indication that the company is drawing in additional customers for the very level of cost or that the subject is lessening its costs while drawing in similar number of customers.
A low cost for every gross expansion (CPGA) relative to peers generally implies that the service provider has an efficient marketing and sales approach in place to secure new customers. A higher cost for every gross expansion (CPGA), then again, will in general demonstrate that too much is being spent to tempt new users to pursue a company's service.
Illustration of How to Use Cost Per Gross Addition (CPGA)
The cost per gross expansion (CPGA) of a remote telephone customer across all carriers is roughly $350 to $400. That sum takes care of the relative multitude of costs associated with winning another customer, which might incorporate the following:
- Sponsored price of the telephone
- Commissions paid to employees or specialists
- Marketing costs
- Extra endowments
However the current trend in mobile telephone service memberships is a leasing arrangement, there stays a cost subsidy to claim most telephones; even ones that are introduced as free. This means that the mobile telephone service carrier is down that $350 to $400 when a contract is marked and is roused to earn that cost back straightaway.
It is likewise roused to hold a customer as far as might be feasible since it costs three times more to win another customer or earn a customer than it takes to hold an existing customer, a valuable bargaining chip for the people who expect to arrange a less expensive mobile telephone service bill.
Special Considerations
While analyzing cost per gross expansion (CPGA), it's memorable's important that companies could ascertain the number in various ways. The shortfall of a uniform method consequently means that logical comparison is generally difficult to apply.
Data on how cost per gross expansion (CPGA) was figured might be revealed in the fine print of a company's financial statement. The footnotes are where companies uncover the practices and reporting policies of their accounting methods. They are much of the time essential perusing and, in this case, ought to be counseled to decide whether a company's cost for each gross expansion (CPGA) is promptly comparable.
It's likewise worth remembering that acceptable cost per gross expansion (CPGA) values will generally vary contingent upon the type of business. For example, service providers operating on a national scale are probably going to spend more on advertising than those with a regional client base.
Features
- Cost per gross expansion (CPGA) values assist companies with setting prices and compare cost productivity among peer groups.
- Cost per gross expansion (CPGA) is a ratio used to evaluate the incremental costs of getting one new customer.
- A low number relative to peers generally implies that the provider has an efficient marketing and sales approach, or vice versa.
- Frequently, applied by companies offer membership based services to clients.
