Six Marketing Metrics Your Boss Actually Cares About

Did you know that 80% of CEOs do not trust the efforts of their marketing teams (HubSpot, 2021). It is why they look into marketing metrics. There are numerous types of marketing metrics. However, there are way too many to focus on all of them. So which ones are the most important? Read on to learn about the metrics employers care most about.

What are Marketing Metrics?

Marketing metrics are a series of formulas that are used to determine the strength of the marketing department and other related initiatives. Metrics are essential in deciding certain paths for marketing efforts. Is it worth keeping this much money in the marketing department? Will it be more beneficial to market to new customers or current ones? These metrics can help sway final decisions in the marketing department. Marketing metrics can include the following aspects:

• Total Cost of Marketing
• Salaries
• Overhead
• Revenue
• Customer Acquisitions

Most employers are looking into the costs of their marketing efforts and comparing them directly to the outcome from these metrics. They ask the question of whether it is truly worth investing the time and money into these areas. It often includes labor costs and management costs (if internal), agency fees (if external), and platform advertising costs.

Six Important Marketing Metrics

1. Customer Acquisition Cost (CAC)

Formula: Sales and Marketing Costs / New Customers = Customer Acquisition Cost

Customer acquisition cost is important because it shows how much the company is spending on average per customer. The company takes the amount spent on marketing over a certain period of time and divides it by the number of customers they acquired during this same time period. The lower the company's customer acquisition cost means the company is working at the most efficient level possible. 

Example:

2. Marketing Percentage of Customer Acquisitions Cost

Formula: Marketing Cost / Sales and Marketing Costs = Marketing Percentage of Customer Acquisitions Cost

The metric above is used to determine the total percentage of marketing cost compared to the percentage of customer acquisitions. The formula helps to break down the whole marketing team's performance and overall impact on the customer acquisition cost. It also helps to separate the marketing team from the sales team. The percentage can help point out which department is lagging behind.

Example:

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

Formula: (Lifetime Value {LTV} = [Revenue the customer pays in a period - gross margin]Estimated churn percentage for that customer):(Customer Acquisition Cost = Sales and Marketing Costs / New Customers) or (Lifetime value: Customer Acquisition Cost)

Ratio of customer lifetime value to customer acquisition cost is critical to looking into the differences between acquiring new customers and keeping any of the existing ones. The ratio compares the differences between the two, and helps to make a decision on whether it is best to keep the marketing strategy that is currently being used. The higher the ratio, the better the ROI. However, it shouldn’t be too high, because the company should still be investing a decent amount on new customers.

Example:

4. Time to Payback CAC

Formula: (Customer Acquisition Cost = Sales and Marketing Costs / New Customers) / (Margin-Adjusted Revenue) = Time to Payback CAC

Time to payback customer acquisition cost is used to determine the amount of time that it takes to make back the money that is spent on acquiring new customers. The key is to get these customers to make back the amount spent within a year's time. The quicker the return on CAC, the quicker the company can truly begin making money off of those customers.

Example: 

5. Marketing Originated Customer Percentage

Formula: New customers started as a marketing lead / New customers in a month = Marketing Originated Customer %

Marketing originated customer percentage is used to separate the customers that come directly from the use of the company’s marketing strategy and the company’s marketing efforts. The higher the percentage means the marketing efforts are paying off. The difference in this percentage can be seen between a marketing strategy that is focused more on an outside sales team and an inside sales support when compared to a strategy with inside sales and lead focused marketing team.

Example:

6. Marketing Influenced Customer Percentage

Formula: Total new customers that interacted with marketing / Total new customers = Marketing Influenced Customer %

Marketing influenced customer percentage takes into account all of the customers that have come into contact with any aspect of marketing, whether or not it influenced their purchase decision. The main objective of this metric is to look into the impact that the marketing may have had on a lead. It allows for a bigger picture view, allowing us to look further into the impact that the marketing campaign has on new customers and possible new leads.

Example:

Importance of Marketing Metrics

Though there are lots of different metrics for marketing out there, the six that we just discussed are considered the most important. They are used to measure the cost compared to the success of the marketing efforts. Whether it’s the cost compared to new customer acquisition or the ratio of lifetime of customers compared to new customer acquisitions, each metric helps the CEO see both how the company’s marketing efforts are working and if it is worth keeping the marketing department the way that it is.

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