How do you decide if a marketing effort was worth the investment?

Data and Analytics

Topic summary

The discussion centers on metrics for evaluating marketing ROI. The primary approach focuses on two key metrics:

Customer Acquisition Cost (CAC) Payback Period:

  • Target: Recovery within 90 days is considered excellent
  • Longer periods require close monitoring
  • Calculated by dividing total marketing/sales costs by new customers acquired

Lifetime Value (LTV):

  • CAC should remain well below LTV (e.g., if LTV is $400, keep CAC significantly lower)
  • Exception: New products where customer feedback justifies higher acquisition costs

Strategic Considerations:

  • Businesses with strong cash flow can afford to “break even” on marketing spend to fuel growth momentum
  • This strategy is highly dependent on individual business circumstances and available capital
  • Cash-strapped businesses may need different approaches

The conversation includes helpful definitions of CAC (customer acquisition cost) and LTV (lifetime value) for those unfamiliar with the terminology.

Summarized with AI on October 24. AI used: claude-sonnet-4-5-20250929.
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How do you decide if a marketing effort was worth the investment?

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I only measure two things to keep it real simple:

  1. CAC payback period
  2. LTV

If my ad spend pays me back within 90 days I’m very happy. If it’s longer than that, I monitor closely.

I also will never let CAC exceed my known LTV. If my LTV sits around $400, I try to keep CAC well under that, unless it’s a new product that I want more feedback on.

This is after 10 years in business though. If you’re strapped for cash, you can’t always pull of that strategy.

If you CAN afford it (ie: you have good cash flow) then “breaking even” on marketing spend can start a positive flywheel and fuel future growth.

This is VERY circumstantial to the business owner’s needs and cash flow.

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In case these acronyms are new to anybody (I scratched my head for some of them from time to time):

CAC - Customer acquisition cost. The average cost to acquire one customer. Your total cost marketing cost and sales spend divided by new customers.

The time it takes for a new customer’s gross profit to cover the CAC would be the CAC payback period.

LTV - Lifetime value for a customer. Pretty much the total gross profit you expect from a customer over their entire relationship with your business.