Paying Back Customer Acquisition Cost – A Matter of Time

Inside the new Ebook, “The 6 Marketing Metrics Your Boss Actually Cares About”, SugarBush President and inbound marketing expert Mark Parent explains the importance of swift payback for your client – the time to payback for customer acquisition costs, that is.

What It Means and Why It Matters

It’s not just the cost to acquire customers that’s important to your boss – it’s the time it takes to put that cost to bed and start profiting from your work. This “Payback Time”, as marketing expert and Ebook author Mark Parent points out is something you “normally [want to be] under 12 months [because] the less time it takes to pay back your Customer Acquisition Cost (CAC), the sooner you can start making money off of your new customers.”

How To Prove Time To Payback

The Time to Payback CAC shows your boss the number of months it takes your company to earn back the CAC it spent on acquitting new customers. Generally, most businesses aim to make each new customer profitable in less than a year’s time – and if you can prove you’ve done that with your marketing efforts, your boss will find your work to be invaluable.

How to Calculate Time To Payback CAC:

CAC÷ Margin-Adjusted Revenue = Time to Payback CAC

You calculate the Time to Payback CAC by taking your CAC (your total sales and marketing spend for a specific time period divided by the number of new customers for that time period) and dividing by your margin-adjusted revenue per month for your average new customer (how much your customers pay on average per month).

A Sample Calculation For Clarity

Parent offers up the following calculation example to help illustrate this equation on page 6 of the Ebook, “The 6 Marketing Metrics Your Boss Actually Cares About”:

Let’s say a company’s Margin-Adjusted Revenue for the past year is $1,000. The cost to acquire that customer (the CAC) for that same year was $10,000. To arrive at the Time to Payback CAC figure, the Margin-Adjusted Revenue is divided by the CAC, for a result of 10, the number of months it took to pay back the CAC. This is well within the desired 12-month margin, making the campaign a successful one.

Show Your ROI With Numbers That Prove Profitability

In industries where customers pay a monthly or annual fee, this Payback Time is of particular interest – since the less time it takes, the sooner your marketing efforts will begin to “pay off”. To learn more about this major metric and the five others that will help prove the bottom-line effectiveness of your marketing efforts to your boss, download and read the informative Ebook “The 6 Marketing Metrics Your Boss Actually Cares About” today. A veritable cheat-sheet for marketers looking to demonstrate ROI in a language that decision-makers can get excited about, this quick Ebook outlines simply and succinctly the ways to translate the information you have into the data your clients want.