Phil Santos owns an independent mobile phone store. He has a wonderful personality, is very knowledge about the products he sell
s and people flock to his store. Phil would like to start selling online so he can reach more customers. He's talked with website developers and the firm he decided to go with will charge him $9500 to build the site. Phil wondered why the site was so expensive and explored the idea of building it himself. He found out it's complicated to build a site that can take payments so he decided to be safe rather than sorry and have it built by experts. They also gave him an estimate of $5300 a year to maintain his site. This will allow him to update the site constantly and add new pictures and videos as new products and promotions are introduced over the course of the year.
A marketing research firm found that he should expect about 133 sales a month averaging about $290 profit per sale. Phil was thrilled with this news and decided to spend $15,000 to add a new room to his store to be used as a shipping area.
He also wanted to make his sales literature and in store promotional materials such as banners, and promotional give-a-ways consistent with the look of the website. Phil has worked with a graphic design class at the local community college and knows it will cost $2300 a year to have the materials designed and printed.
What is the cost to acquire each new customer? Show your full calculation.
Does it make sense for Phil to sell his products online?
Suppose: C=cost c=cost per kilo-watt hour w=number of watts h=number of hours thus C=kwhc where: k=constant of proportionality: k=C/(whc) but C=15 when w=6000, h=10/60=1/6 hours, c=7.5 cents per kw/h thus k=15/(6000*1/6*7.5) k=0.002 thus: C=0.002(whc) hence: when h=70*2=140=140/6=70/3 hours the cost will be: C=0.002(6000*70/3*7.5) C=2100 cents C=$21
