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How to Calculate the Bottom Line Marketing Metrics That Mean Business

How to Calculate the Bottom Line Marketing Metrics That Mean Business

Not all numbers are created equal. In business and marketing, there are the metrics marketers collect and the metrics managers want. Which will you be presenting to your boss at the end of Q2?

Website impressions and click-through rates are important metrics to track in order to improve your marketing efforts (see how you can use your metrics to improve your marketing ROI), but your CEO and CFO are more focused on how marketing directly impacts the company’s bottom line.

As you get ready for quarterly reports and begin to prepare budget requests for next year, two figures you will want to understand and be able to present to your boss include:

  • Ratio of Customer Lifetime Value to Customer Acquisition Cost

  • Time to Payback Customer Acquisition Cost

Obviously, one factor in both of these equations is the customer acquisition cost, which we covered a year ago.

If you’re not sure about how to calculate the customer acquisition cost, check out this post or download the entire ebook: 6 Marketing Metrics Your Boss Actually Cares About.

Ratio of Customer Lifetime Value to Customer Acquisition Cost

The ratio of customer lifetime value (LTV) to customer acquisition cost (CAC) is a way for companies to estimate the total value that your company derives from each customer, compared with what you spend the acquire that new customer.


Lifetime value is the revenue the customer pays in a period, such as a year, minus the gross margin, divided by the estimated churn percentage for that customer. In other words, what is a customer worth to your company over the length of their time doing business with you.

 (Revenue minus Gross Margin) divided by Estimated Churn Percentage

Understanding and presenting this metric is a sign that you understand that marketing isn’t simply about customer acquisition at any cost. It is about acquiring and keeping customers long enough to see real returns on investment.

The higher the LTV:CAC, the more ROI your sales and marketing  team is delivering to the company’s bottom line. But if the ratio is too high, it could also be a sign you aren’t investing enough in new customer acquisition. It’s a balancing act between maintenance and growth.

Time to Pay Back Customer Acquisition Cost

This is fairly straightforward — how long does it typically take for a customer to do enough business with your company to recoup the cost of acquiring them as a new customer?


CAC divided by Margin-Adjusted Revenue = Time to Pay Back CAC

Margin-adjusted revenue is how much your customers pay on average per month.

In industries where your customers pay a monthly or annual fee, you normally want your payback time to be less than 12 months. The more quick the CAC is paid back, the sooner new customers are generating profit for the company.

Generally, most businesses aim to make each new customer profitable in less than a year.

There is nothing wrong with tracking your traditional marketing metrics, and actually a lot your marketing department can learn from them, but when it’s time to report to the rest of your organization focus on the numbers that most directly impact the bottom line.

How many of the 6 Marketing Metrics Your Boss Actually Cares About are you including in your reports to the C-suite? Download the ebook and prove that you really do know which numbers matter most.

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Download our guide 6 Steps to Creating Enviable Brands to learn the crucial steps you should follow to create an enviable brand for your company.

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