Our marketing KPI cheat sheet is designed to provide easy access to common formulas and KPIs. This cheat sheet includes common metrics such as Cost-Per-Acquisition (CAC), Return-On-Ad-Spend (ROAS), and Customer Lifetime Value (CLV). It also includes formulas for underlying metrics needed to calculate these KPIs.
The Marketing KPI Cheat Sheet
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Included below are brief definitions and tips that provide additional details about the metrics featured above.
Customer Lifetime Value (CLV)
At the most basic level, Customer Lifetime Value (CLV) is multiplying a customer’s total revenue by the customer’s lifespan.
The formula in the cheat sheet takes this basic formula and breaks customer revenue out into average purchase value and the avg number of transactions.
The cheat sheet also incorporates Gross Margin, but if you don't know your company's gross margin, you can use the formula above instead.
Incorporating Gross Margin to CLV
If you know the gross margin for your company, it’s a good idea to incorporate this value into your CLV calculation.
Here is the formula for CLV that includes Gross Margin (GM):
This is the method we included in the cheat sheet.
Incorporating Your Company’s Capital Costs
When we assign a value to a new customer based on CLV, we’re projecting future cash flows. Money received in the future isn’t as valuable as having that same amount of money today. The discount rate helps to account for the diminished value of future cash flows.
GM = Gross Margin
RR = Retention Rate
Discount Rate (Cost of Capital) = This is the average cost to a company for acquiring capital. It aggregates the interest rates on both debt and equity. A typical range for this value is anywhere from 5% to 20%. The rate is low for large, stable businesses and higher for companies that are new and face a lot of risk.
Acquisition margin is a metric that incorporates both CLV and CAC. This metric measures the gross profit margin of acquiring new customers and the overall financial performance of marketing's acquisition efforts.
A higher number suggests that your acquisition efforts are profitable and your company needs to aggressively invest in this area. A lower number is a sign that something needs to be addressed. The cause could be a variety of factors including poor acquisition strategy, unnecessarily high operating costs, bad pricing strategy, and other factors. Some of these factors are out of marketing's control.
Net Promoter Score (NPS)
This metric is used to measure customer loyalty and satisfaction by asking customers a simple question: "On a scale of 0-10, how likely are you to recommend our product/service to a friend or colleague?" Based on their responses, customers are categorized into promoters, passives, or detractors. Promoters are customers who rate you as a 9 or 10. Detractors are customers who rate you between 0 and 6. Companies with a high percentage of promoters are more likely to see organic growth through reviews and word-of-mouth referrals. NPS is commonly expressed as a ratio:
An important part of measuring this is establishing a systematic process of collecting and storing the data. Collecting this information might involve email, surveys, or one-on-one interviews.
Retention Rate and Churn Rate
Retention rate is a metric used to measure the percentage of customers your company retains over a specified period of time. It is a valuable indicator of customer loyalty and satisfaction. If your company implements a loyalty program or service enhancement, this is the metric that will show the impact of the initiative on customer satisfaction. The churn rate is the inverse of the retention rate. It's measuring the undesirable outcome of the same behavior.
If these rates start trending in positive or negative directions, this should trigger an initiative to understand why. You can dig into causes using web analytics, reviews, survey data, or feedback from sales and customers.
WAU/DAU stands for Weekly Active Users divided by Daily Active Users. The metric compares the number of unique users who interact with the product within a week (Weekly Active Users or WAU) to the number of unique users who engage with the product on a daily basis (Daily Active Users or DAU). This is used to measure user engagement and retention for websites and mobile apps.
A high WAU/DAU suggests that users are returning to the product throughout the week, and a low WAU/DAU ratio indicates that users are not consistently using the product over time.
This is similar to WAU/DAU but uses Monthly Active Users (MAU) in place of WAU. This metric measures user engagement and retention over the course of a month.