By Patrick Panuncillon
Gone are those days when a chief marketing officer, commonly known as CMO, is not so knowledgeable in analytics, spreadsheets, and metrics. The Internet has paved the way in making everything related to marketing as measurable as possible.
However, we still hear some of them who whine due to the struggle in identifying what metrics will establish their credibility with their companies’ CEO and CFO. As time goes by, we noticed some of the most useful marketing metrics that our very own CEO and CFO care about most. Here are some of them.
1. Customer Acquisition Cost
This metric is the total cost of your sales and marketing efforts. You have to add everything that you spend on advertising or programs.
Also, include the salaries, bonuses, commissions of your employees in your company (e.g., the pay of all the staff in companies that manage SEO and overhead expenses for a particular period). Get the sum of these things and divide it by the number of customers for that given time, the quotient will be your CAC or customer acquisition cost.
Let’s say, for example, the sum of all the expenses is $550,000, and you have a total of 50 customers at that time, then your customer acquisition cost is $11,000.
2. Marketing Percentage of Customer Acquisition Cost
CMOs commonly compute it this way: They get the marketing part of the CAC and then calculate that as a percentage of the overall CAC. This part here is the most interesting thing to watch. A change in your customer acquisition cost’s marketing percentage means that something has changed in your strategy or your performance.
For example, if you see an increase in your CAC’s marketing percentage, it’s either:
- You’re spending too much of your budget in your marketing efforts.
- Sales and profits are flat because of quotas not hit.
- You’re trying to raise the productivity of your sales by allocating more budget on marketing, and you provide more leads that are of high quality to sales.
3. Lifetime Value of Your Customer to CAC
For those businesses who have a continuous stream of revenue from their clients or in any way, a customer repeats a purchase — you have to learn how to estimate the value of the buyer and compare that to the total cost of acquiring such customer.
For you to compute the lifetime value (LVT) of a client, subtract the gross margin from the total revenue you’re getting from that customer for a particular period. Divide the answer by the estimated percentage of churn for that customer. The quotient will be the total LTV.
These are just some of the metrics you need to master if you want to impress your CEO and CFO especially those in the SEO management industry. Since we do not have all the answers for everything, feel free to add more in our comment box below.