What is an acquisition cost?

The acquisition costs are refer to the general costs of purchasing an asset. Along with the actual purchase price, the acquisition cost takes into account factors such as shipping charges, closing costs, or any expenses incurred as part of the purchasing activity. The recognition of the actual cost of acquisition is a common element when individuals and companies consider any type of purchase.

A good example of customer acquisition cost is found with the purchase of real estate. When an individual chooses to purchase a home, the purchase price forms the basis for all associated costs, but it is far from the total cost of purchase. There are typically a number of fees that come with obtaining the financing, the annual interest associated with the mortgage, and the closing costs paid to the real estate agent. If the property requires a professional appraisal for wiring, plumbing, or structural integrity, these costs should also be factored into the total amount paid to complete the deal.

Advertising is another profession that deals with acquisition cost. Essentially, advertisers will look at the costs of marketing products and services to increase the number of units sold. In this app, the acquisition in question is the new customer who will hopefully become a repeat customer and will continue to buy new products and services from the supplier as a result of your marketing efforts. By splitting the cost of customer acquisition as it relates to acquiring new customers, you can set budgets for marketing and advertising, as well as packaging design and other important aspects of the sales process.

The same is true for providers that offer ongoing subscriber services. To determine the cost per acquisition, all aspects of service delivery are taken into account. For example, a telecommunications provider typically sets a monthly subscription fee that covers the cost of operating the equipment to provide the service, personnel to operate the equipment, billing costs, and any other expenses necessary to enable the service to be delivered. Properly evaluating subscriber acquisition costs will prepare the company to earn enough profit to continue providing these services to current and future customers.

Depending on the nature of the business, other factors may also be considered part of the acquisition cost. Insurance costs, replacement manufacturing equipment, freight costs, raw materials, and whatever else is needed to create the good or service must all be considered when determining the true cost of acquiring new assets such as real estate or even new customers. While the specifics will change from instance to instance, focusing on the purchase or the actual cost is far more important than simply knowing the basic purchase price.