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There's a near endless list of metrics available, I'm sure we're all familiar with that of website visits, conversion rates, social media engagement, blog post shares, email click-throughs...
In this blog we're going to look at metrics that are relatable to those running the business, metrics that take into account the total cost of marketing, salaries, revenue, and customer acquisitions.
Customer Acquisition Cost
What is it?
The Customer Acquisition Cost (CAC) is a metric that's used to determine the total average cost your company spends to acquire a new customer. You can use this metric consistently to gain insight into how your CAC changes over time, and whether your sales and marketing spend is giving you the results you desire.
How to calculate it?
Take your total sale and marketing spend for a specific time period and divide it by the number of new customers for that time period.
Why does it matter?
CAC illustrates how much your company is spending per new customer acquired. With these figures you'll be able to show your boss that your sales/marketing efforts are having a profitable impact (hopefully!) on your customer acquisition.
It's important to take into account certain internal and external factors which may impact your figures, such as seasonality of sales - we've covered influencing internal and external factors within our blog 'The ultimate guide to membership forecasting' which may help you get a better idea of what you can expect to influence your figures.
Marketing % of Customer Acquisitions Cost
What is it?
The Marketing % of CAC is a metric focused solely on your marketing efforts' impact on CAC.
How to calculate it?
Take all of your marketing costs and divide by the total sales and marketing costs you used previously to calculate your CAC.
Why does it matter?
This metric can be used comparatively to the first metric we mentioned in order to give insight into how your sales/marketing teams are performing.
If you Marketing % of CAC increases, this could suggest a number of things:
- Your sales team could be underperforming
- Your marketing team is overspending or their overheads are too high
- You are investing in your marketing intentionally to provide higher quality leads in order to streamline your sales productivity
Ratio of Customer Lifetime Value to CAC
What is it?
This metric is used in order to understand the total value of a customer compared to the spend required to acquire that customer.
How to calculate it?
First you'll need to calculate the lifetime value by taking your gross margin from the revenue the customer pays in a period, then divide that figure by the estimated churn percentage for that customer. Once you've got this figure you need to put it in a ratio of customer lifetime value:CAC. So a figure of 5:1 would indicate the cost of acquiring one customer returns 5 times as much over all.
Why does it matter?
Generally the higher your lifetime value to CAC, the better return on investment (ROI) your sales and marketing team is delivering. However if this ratio gets too high this will indicate that you might want to invest more into reaching new customers, spending more of sales and marketing will lower your ratio, but could increase the speed of your overall company growth.
Time to payback CAC
What is it?
This metric will indicate how long it takes your company to earn back the CAC spent int acquiring new customers.
How to calculate it?
Take your CAC and divide it by your margin-adjusted revenue per month for your average new customer (your margin adjusted revenue is how much your customers pay on average per month). Remember, the figure you end up with will be in months.
Why does it matter?
Ideally, if your customers pay a monthly or annual free, you should aim for your payback time to be under 12 months. The lower your payback time, the quicker your company is making each customer profitable.
Marketing Originated Customer %
What is it?
This metric looks into what new business is generated by your marketing efforts. This is done by determining which portion of your total customer acquisitions directly originated from your marketing efforts.
How to calculate it?
You'll first need to be able to see which new customers were generated as a marketing lead, which can be done easily in HubSpot CRM by using analytics and dashboards. Once you've found your new customers that started as marketing leads, you'll need to divide by your new customers generated in a month to give you your marketing originated customer %.
Why does it matter?
This metric highlights the impact of your marketing team's lead generation efforts on the acquisition of new customers. This percentage is very much dependent on your individual business structure, larger more established non-profits with established sales teams and lead-focused marketing teams will be looking at a higher percentage than that of less established teams.
Marketing Influenced Customer %
What is it?
This metric differs to the last by looking at the impact marketing has on a lead during their entire buying lifecycle. It takes into account all of the new customers that marketing interacted with while they were leads, anytime within the sales process.
How to calculate it?
In order to calculate this, you'll need to take all of the new customers your company acquired in a given time frame, and find out what % of them had any interaction whatsoever with marketing whilst they were a lead. Once you've got your total new customers that interacted with marketing, divide this by your total new customers to give you Marketing Influenced Customer %.
Why does it matter?
This metric is great for showing the overall impact that marketing is having on the entire sales process (a great one to show a boss that might be giving most of the credit to sales). This metric can indicate how effective marketing is at generating new leads, nurturing existing ones and helping sales close the deal.
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Sometimes 'softer' metrics such as likes on a social post fail to show the true impact of marketing, and fail to resonate with the decision-makers of your company. Keep these six metrics in mind the next time you're asked to report on your marketing efforts, and bear in mind that site traffic and conversion rates are still important metrics to take into account - but showing the same metrics that fail to show how your company's bottom line is affected time and time again might not generate the reaction you're after.
If you're interested in chatting with one of our non-profit experts, just click the button below!
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