Meeting with the boss to talk about results and plan budgets is never easy. Your brain is swimming with numbers: website visits, conversion rates, email click-throughs, leads generated per channel, and dozens more. Your job is to choose the metrics that best show how your marketing department impacts the company’s bottom line. It’s a tense situation at best.
So what marketing metrics does your boss really want to see? Let’s do the math.
Customer Acquisition Cost
The Customer Acquisition Cost (CAC) is a metric used to determine the total average cost your company spends to acquire a new customer. It is found by determining your total sales and marketing costs for a specific time period and dividing that amount by the number of new customers acquired in that time.
Total sales and marketing costs include program and advertising expenses, salaries, commissions, bonuses, and overhead.
Here is how the formula works:
Why It Matters: CAC illustrates how much your company is spending for each new customer acquired. You want to show your boss a low CAC. If the CAC is increasing, it indicates that the company is spending more for each new customer, which can imply that there is a problem with sales or marketing efficiency that needs to be addressed.
Marketing’s Share of Customer Acquisition Cost
While CAC looks at the total cost for each new customer, you may want to be able to show the executive suite what portion of that cost comes from marketing, which is calculated as Marketing’s Percentage of Customer Acquisition Cost (M%-CAC, for short).
To calculate M%-CAC, total up all of your marketing costs, and then divide that figure by the total sales and marketing costs you used to compute CAC. The marketing costs include expenses, salaries, commissions, bonuses and overhead for the marketing department only.
A sample formula would look like this:
Why It Matters: The M%-CAC can show how your marketing team’s performance and spending impact the overall Customer Acquisition Cost. When marketing’s share of CAC goes up, it can mean:
1. The sales team may have underperformed, receiving lower commissions and bonuses.
2. The marketing team is spending too much or has too much overhead.
3. You are in an investment phase, spending more on marketing to provide more high quality leads and improve sales productivity.
The cost of acquiring a customer is a concrete figure that ties directly into budgeting and strategic planning - the areas where executives place their focus. Presenting those kinds of numbers, along with analyzing the softer metrics involved in marketing, shows your boss that you mean, and understand, business.
We’ve identified four more key marketing metrics your boss wants to know in our free ebook. Download it now so you are ready to do the math for the next budget meeting.