Marketing Strategy & Pro Tips from Tag Marketing

6 Important Marketing Metrics Made Simple For You & Your Boss {Chart}

Posted by Chris Taglia on Jun 22, 2017 11:54:40 AM
Marketing Professional
6 marketing metrics made simple with chart

We simplified these important marketing metrics, including a cheat sheet & chart below, so you are able to show your boss trackable data that they actually care about and can actually understand such as cost-per-acquisition, customer’s lifetime value, where to best spend their budgets, and how long it will take to see returns.

Consider where your advertising money is being spent in your business right now. What exactly are you measuring, why are you picking these specific things to measure, what do you learn from the results, and how to you take action moving forward?

Some of this data can be helpful to look at within a marketing team, because you will get the assistance you desire in making smart decisions on what areas of your marketing needs more focus, which need fixing, and which are broken and need to be dropped.

But now look at it from your boss’s perspective. Studies show that 73% of executives don’t believe that marketing drives demand and revenue; it's important to make sure that you can prove the ROI of your marketing efforts and show the value of your team.

While growing our company, working with various CEOs, and partnering with HubSpot we have discovered the six most important marketing metrics executives want to see. This list is meant to focus on the most crucial measures of marketing that your boss will likely want to discuss with you in your next meeting. Now, here's where the marketing metrics made simple chart and examples comes in!

What Are Marketing Metrics & How Are They Useful In Growing My Company?

1) Customer Acquisition Cost (CAC)

The Customer Acquisition Cost (CAC) tells you your total cost of Sales and Marketing to gain that customer -- add up all the program or advertising, salaries, also commissions and bonuses, and overhead -- in a time period, which could be calculated by month, by quarter, or by year. Divide that total by the number of new customers in that time period.

  • Example: If you spent $300,000 on Sales and Marketing in a month and added 30 customers that month, then your CAC is $10,000.

2) Marketing % of Customer Acquisition Cost (M%-CAC)

The CAC combined with the Marketing % (the M%-CAC), gives you an overall CAC % total. This M%-CAC total is nice to monitor because it tells you if there are any inconsistencies, and any changes signal that something has been affected in either your strategy, or your effectiveness.

  • Example: an increase in either means that 1) you are spending too much on marketing, 2) that sales costs are lower because they missed quota, or 3) that you are trying to raise sales productivity by spending more on marketing and providing more and higher quality leads to Sales.

3) Ratio of Customer Lifetime Value to CAC (LTV: CAC)

The Ratio of Customer Lifetime Value is for the companies that have a recurring revenue from their customers -- or ways for customers to make a repeat purchase.

  • Take the estimate of the current value of a customer and compare that to what you spent to acquire that new customer.

The LTV is calculated be taking the revenue the customer pays you in a period, while subtract out the gross margin, and then dividing that by the estimated cancellation rate % for that customer.

  • Example: For a customer who pays you $100,000 per year where your gross margin on the revenue is 70%, and that customer is predicted to cancel at 16% per year, then the LTV is $437,500.

Once you have the LTV and the CAC, compute those totals to give you that ratio.

  • Example: If it cost you $100,000 to attract this customer with an LTV of $437,500, then your LTV: CAC is 4.4 to 1.

Most investors want this ratio to be greater than 3X, as a higher ratio means you are using an effective sales and marketing strategy. However, too high of ratio may mean you need to focus spending more money on sales and marketing to acquire new customers to grow faster.

4) Time to Payback CAC

The Time to payback CAC is the amount of months it would take you to earn back the CAC cost spent on getting a new customer.

To figure what the time to payback CAC, you take the CAC and divide by margin-adjusted revenue per month for the average new customer you just signed up, and that gives you the number of months to payback. In industries where customers pay one time upfront, this metric is less relevant because the upfront payment should be greater than the CAC, otherwise you are losing money on every customer. Usually in the companies where customers pay a monthly or annual fee, you want the Payback Time to be within a 12 month time frame. This means that you become “profitable” on a new customer in under a year, and then after that you start making money.

5) Marketing Originated Customer %

The marketing originated customer % shows what % of your new business is driven by Marketing.

The marketing originated customer % is calculated by taking all of the new customers you signed up in a period, and looking at what % of them started with a lead that Marketing generated. This is a lot easier to do when you have a closed-loop marketing analytics system.

This tool is useful in that it directly shows what portion of the overall customer acquisition originated in Marketing, and it is often higher than the Sales.

This % varies widely from company to company due to the type of business it is. This percentage might be pretty small, perhaps 20-40% for companies with an outside sales team supported by an inside sales team with cold callers,; for a company with an inside sales team that is supported from leads generating from Marketing, it might be 40-80%; and for a company with less customer generated sales, it might be 70-95%.

6) Marketing Influenced Customer %

The marketing influenced customer % adds in all the new customers where Marketing generates the lead during the sales process, this is similar to the marketing originated customer %, only adding in other factors associated with a marketing generated lead.

  • Example: If a lead was found by a salesperson, and the lead then attends a marketing event and later closes, that new customer was influenced by Marketing. This % is obviously higher than the "Originated" percentage, and for most companies should be somewhere between 50% and 99%.

Marketing Metrics Made Simple With A Cheat Sheet Chart

ceo marketing metrics made simple infographic

Use these formulas above to better understand how your money is being spent, and what areas you should focus your time on to improve profit margins and reach your goals; these are things that matter the most to CEO's and business owners. If you want more info and an even more marketing metrics made simple breakdowns, download and checkout our FREE {Cheat Sheet} below.

 

Checkout [Cheat Sheet] 6 Most Important Marketing Metrics

eBook & Cheat Sheet - 6 Most Important Marketing Metrics For A Boss

Topics: Local Marketing, Business

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