Let's assume I'm using Google AdWords and I'm paying $0.50 per pay-per-click. Now, let's assume my campaign at $0.50 each gets me 10,000 people to come look at my website. Well, $0.50<i>10,000, that cost me $5,000, but the goal isn't to just have people visit,</i> the goal is to get them to the end of the funnel and at the end of the funnel, I want them to actually have paid for and/or used the product, so the goal is to activate them.. Now, what's interesting is assume I'm offering a trial and assume that maybe just 5% of the people who I've acquired actually now take the trial. And so I now have 500 people using my freemium product but the goal is not to just have them use the freemium product--. the goal is to actually have them pay for it and what's interesting is, assume 10% of those now actually paid. I'd start with 10,000 people who came to my site and I spent $5000 for them, 500 people took a trial of the product and 50--only 50 actually paid for the full version of the product. So while 10,000 people upgrade for 5 grand because it only cost me $0.50 per person. If we now do the math, we can now see it cost me $100 to acquire one paying customer. That $100 equals my customer acquisition cost. I used this example for a web/mobile channel but it's similar for physical channel. You might not be doing pay per click, you might be doing direct math, or you might be doing television or radio math, but the math works the same. How much did it cost to acquire a customer? How much did the campaign cost? How much did it cost to get them to consider your product? How much did it cost them to take a test drive of your car or fly your airline? And what in the end was your customer acquisition cost? That's a key number for any founder thinking about a startup.