If you are the marketing director or CMO at your company, you need to quantify the work that you or your team are doing. As you are accountable for the online success of your business, you want to showcase to your CEO that even in the earliest stages your campaigns are showing signs of positive gains and be aware of areas that are not working favorably. Most CEO’s really only care about the cost of doing business compared to revenue and customer acquisition, but there are other useful metrics that can indicate the progress of your online marketing as well.
Customer Acquisition Cost (CAC)
Your CAC is the total of your sales and marketing costs –advertising spend, employee salaries, SEO, PPC, social media, overhead—in a given time period, divided by the number of new customers acquired in that time period. You can measure this time period in a month, a quarter or a year. For example, if you spent $100,000 on sales and marketing in a month and got 10 new customers that month, your CAC is $10,000.
Time to Payback CAC
After you have answered your CAC, you will want to know how long it takes for that online marketing investment to pay you back. This is most important in industries where customers have recurring terms such as monthly or yearly plans. To get this number, take the CAC and divide by the amount your customers pay you on average each month (in this example). A higher time to payback means it takes you longer to earn back the CAC meaning you may have a problem with your marketing. Generally a nine to 18 month time to payback is a reasonable number to fall within.
Marketing Originated Customer Percentage
This metric tells you what percentage of your new business is directly originated by your online marketing. To get this number, take all of the customers you signed up in a given period and look at the percentage of them that started with a lead from one of your online campaigns. If your marketing department is doing a good job this number should be going up.
Above we looked at how much it costs to obtain new customers, the time it takes for your customers to make you money after marketing, and the percentage of customers that are acquired by marketing. These metrics will give you and your CEO (or board of directors) a good idea of how you are doing and where improvements can be made, if any. These metrics are fairly simple to quantify although they tell a lot about how your company is doing.
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