Terms and Formulas To: Measure Your Marketing Goals
Terms and Formulas To: Measure Your Marketing Goals
Terms and Formulas To: Measure Your Marketing Goals
Measure Your
Marketing Goals
Advertising KPIs: ROAS, ROI, CPR, CAC
ROAS ROAS, or Return on Ad Spend, Revenue ÷ Ad Cost = If you spent $1 on advertising and $10 ÷ $1 = 10
(Return on calculates how much revenue ROAS made $10 off of that advertising,
Ad Spend) you made on your advertising, your ROAS is 10. It can also be
versus what you spent on your expressed as 10:1, or 10x. That means Your ROAS is 10.
campaign. that this advertising made ten times
what was spent on it.
ROI Your ROI calculates your (Revenue - Let’s say you’re a company that Total Revnue = $10,000
(Return on bigger-picture spending of Investments) made a revenue of $10,000 from a
Investment = $2,800
Investment) revenues, investments, and ÷ Investments = ROI product. You invested $2800 into
advertising, versus the profits that product. This means your ROI ROI=
you make. was 2.57, and that you made 2.57 ($10,000-$2,800) ÷
times what you invested in the $2,800 = 2.57
product.
Your ROI is 2.57.
CPR (Cost Your cost per result looks at how Total spent ÷ # of Results Let’s say you spend $200 on a $200 ÷
Per Result) much you paid for a specific = CPR reach campaign, and get 1000 1000 impressions = .20
result. This could be a link click, a impressions. Your cost per results
lead, an app install, a customer would be 20 cents/ impression. Your cost per result is
buying a product, engagement $0.20 per impression.
with a post, an impression, or any
number of other actions you
wanted to happen.
CAC Your customer acquisition cost is Total cost of sales ÷ Let’s say you spend a sum total of $19,000 ÷ 1,000 = $19
(Customer the total marketing cost you Number of customers $19,000 targeting new customers,
Acquisition spend to get one new customer. acquired = CAC* and make 1000 sales to 1000 new Your CAC is $19.
Cost) It’s actually a type of ROI, that customers. This means your CAC is
measures conversions among *This only applies in $19.
new customers. conversion campaigns
that target new
customers.
Customer Value KPIs: ACV, ACL, LTV
ACV (Average The ACV, or Average Average Customer’s Value = (Average Purchase Value) Let’s say we have a ACV=
Customer’s Customer’s Value, is x (Average Purchase Frequency Rate) company that makes
Value) $1000 in revenue, and ($1000/
how much a customer To determine the Average Purchase Value, we solve
spends in a set amount has 50 customers. The 100 purchases) x
for:
customers have bought (100 purchases
of time. This is done by Total Revenue ÷ Total Purchases = APV
100 items, combined in in one month /
multiplying the Average
And to determine the Average Purchase Frequency one month. 50 customers)
Purchase Value, or the
Rate, we solve for:
average amount a How do we calculate our Our Average
customer spends per Number of Purchases ÷ umber of Customers = APFR
N ACV? Customer’s
purchase, by the Value is
Average Purchase Thus, the Average Customer’s Value formula can also $20/month.
be written as:
Frequency Rate, which ACV= (Total Revenue/Total Purchases) x (# of
is how many purchases Purchases/#of Customers)
you would typically get
from one customer.
ACL (Average The Average Customer There’s no formula for this. You’ll have to rely on For our exercise, we’ll N/A
Customer Lifespan is how long a company data or a forecasting tool. say the Average
Lifespan) customer relationship Customer Lifespan is 5
typically lasts with your
years, or 60 months.
company. You may know
this data from experience,
or by looking at your churn
rate, or, if you're a younger
company, by forecasting.
LTV Your LTV both LTV= Now we know our Average LTV=
(Customer estimates and measures Customer Value is
Lifetime how much your (Average Customer’s $40/month, and a ($20/month) x (60
customer’s lifespan, or months)
Value) customer will spend Value) x (Average
relationship with our
with your business over Customer Lifespan) company typically lasts 60 Our Customer
the span of their months. This means our Lifetime Value is
relationship with you. Customer Lifetime Value is $1,200.
$2400.