Marketing metrics are important, but at most companies, leadership will value certain measurements more than others. Keep reading to find out what the most critical metrics are so that you’re prepared the next time your executive-level managers need to see them.
Customer Acquisition Cost
Customer acquisition cost (CAC) plays a role in several other metrics, but it is also telling on its own. Neil Patel has a helpful explainer on CAC here, but the gist is this: To calculate CAC, simply divide marketing expenses from a given period by the number of customers acquired in that same period.
The LTV:CAC metric refers to the ratio of customer lifetime value (LTV) to the CAC. As explained by the Corporate Finance Institute, this ratio compares the cost of gaining a customer to how much money they generate for your company. (Click on that Corporate Finance Institute link for a more detailed look at how to calculate LTV:CAC.)
In general terms, an LTV:CAC ratio of less than 1.0 is bad: The company is losing value. A ratio of 3.0 or higher is almost always good. However, if the ratio is extremely high, that may be a signal your company should increase its marketing efforts to gain more customers.
CAC Payback Time
CAC payback time—also known as a time to payback CAC—reflects how long it takes your company to recover the money it spent acquiring a customer. There are more effective metrics out there for industries where payment is due immediately and always arrives on time. However, for subscription-based companies, this is a highly useful metric.
Marketing-Originated Customer Percentage
If you’re looking to argue for the effectiveness of your marketing campaigns, then few metrics are more useful than the marketing-originated customer percentage. As the name suggests, this metric measures the percentage of new customers that a business gains through its marketing efforts.