The Internet has made marketing more measurable than ever before. This means marketers – long viewed as wishy-washy creative types – need to be fluent in metrics to garner credibility with the C-Suite.
Here are 4 metrics that your CEO will care about (and that you should know).
1. Customer Acquisition Cost (CAC)
Add together your marketing spend, commissions and bonuses, overhead in a set time period and divide by the number of new customers in that time period to get a precise sense of what it costs you to acquire a customer. The time period could be a month, a quarter or a year. For instance if you spent $200, 000 on sales in a month and added 20 customers, then your customer acquisition cost will be $10, 000.
2. Marketing % of Customer Acquisition Cost (M%-CAC)
This metric speaks to the percentage marketing activities account for in acquiring a new customer. It is what you – the marketer – are responsible for. Any change in the M%-CAC signifies a change in either your effectiveness or your strategy. As a rule of thumb, it can be said that the M%-CAC for companies with a complicated sales cycle will be 10-20%; for companies with inside sales team and a less complicated sales cycle, it will be 20-50%; and for companies with low cost and simpler sales cycle it will be more likely 60-90%.
3. Time to Payback CAC
How quickly are you paying back the cost associated with acquiring a new customer? Good thing to know! Take the Customer Acquisition Cost, divide by the margin-adjusted revenue per month for your average new customer and you get the number of months it took you to earn back the Customer Acquisition Cost (CAC). This metric is less relevant in companies where customers pay one time, upfront and payments are greater than the CAC.
4. Marketing Originated Customer %
This ratio shows what % of new business is driven by marketing. To compute it, take into consideration all the new customers you signed up in specified period, say a month, a quarter, or a year. Then look at what % of them can be attributed to a lead generated through marketing.
This metric directly shows what portion of the overall customer acquisition can trace its roots to marketing. It is thus GOLD for you, dear marketer! You can also compute this percentage using revenue, instead of customers, depending on how you prefer to look at your biz dev process.