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5 Performance Marketing Metrics that D2C Marketers swear by26 min read

September 05, 2022

, by Manu Gupta, VP, Business Innovation, ET Medialabs

Online marketing and associated systems that charge advertisers only after successful outcomes like leads, sales, clicks, and other conversions are referred to as performance marketing. Establishing goals and measurements, their performance, and their optimization in every marketing campaign are the most critical components of performance marketing. These objectives are determined by a company’s character, the type of campaign, and the expected outcomes.

In performance marketing, we essentially want to see the growth of the selected indicators and are willing to pay for that growth to increase our marketing ROI. However, there are 5 essential metrics you need to track to measure your performance marketing efforts no matter the type of your business. These metrics are very essential to keep track of your business health apart from the regular metrics such as Revenue and ROI.

While almost all brands keep a track of their aggregated revenues and spending, they have top-line visibility of how the business is performing periodically.

By keeping a track of Revenue vs ROI, brands often miss out on deeper insights into their customers and channels.

It is a known fact that revenue is best driven by website visitors and existing customers. Hence, while looking at the macro level of revenue & ROI, the customer type segmentation often gets overlooked.

This is why we usually recommend the brand to keep track of the following key metrics for a robust health monitoring of business.

1. NCA

NCA stands for New Customer Acquisitions and this refers to any customer that is making a purchase from the brand for the first time ever. The NCA optimization enables us to acquire new customers through our Performance marketing campaigns. This optimization also helps us to grow overall revenue as new customers often turn into lifelong customers and contribute tremendously to the overall business. 

2. CAC

Mathematically, CAC is defined as money spent on acquiring a new customer. Brands who are young in the journey should look at their marketing spends and divide it by the number of acquisitions received in the period. The CAC should be based on a unique identifier – either the Mobile Number of the customer, or the email ID.

It can be computed very easily from the CRM data without complex calculations or programming.

CAC for the brand should be kept track of at the following dimensions –

  1. Overall blended CAC (All acquisitions (organic + paid)/Performance spends)
  2. Paid Channels CAC (Paid Acquisitions/Performance spends)
  3. Channel-wise CAC (For FB, Google Search, etc. )
  4. Category-wise CAC (Category spends (if available)

Sample Data

Month

Spends

Acquisitions

CAC

Paid Acquisitions

Paid CAC

Jan 2022

₹15,000,000

2,600

₹5,769

1,800

₹8,333

Feb 2022

₹14,500,000

2,800

₹5,179

1,850

₹7,838

Mar 2022

₹16,000,000

3,400

₹4,706

1,950

₹8,205

Apr 2022

₹16,500,000

3,000

₹5,500

2,000

₹8,250

3. Customer Lifetime value

CLTV is mathematically defined as the sum of revenue given by an average customer in his lifetime.

In the case of new D2C brands, they should focus on customers who are making purchases repeatedly.

For example, a personal care brand would like its customer to make a purchase every month or so. Whereas in the case of a jewelry brand, customers might make another purchase in another 6/12 months.

Depending upon the brand’s category and average ticket value, the frequency of purchase will vary.

Hence, each brand should determine its average cycle when the customer is more likely to make another purchase.

For a personal care brand, they may consider a 3-month LTV or a 6-month LTV for keeping track of consumer behavior changes.

3 month or a 6 month period allows brands to determine if they are treading in the right direction or not.

Just like CAC, CLTV should also be calculated Overall, Paid, channel & category-wise.

Sample Data

Month

Acquisitions

Same month revenue

1st month revenue

2nd month revenue

3rd month revenue

4th month revenue

4 month CLTV

Oct 2021

2,800

₹22,680,000

₹4,536,000

₹3,402,000

₹2,494,800

₹680,400

₹12,069

Nov 2021

2,600

₹21,190,000

₹4,661,800

₹2,119,000

₹2,542,800

₹529,750

₹11,940

Dec 2021

2,500

₹18,750,000

₹3,375,000

₹2,812,500

₹1,687,500

₹468,750

₹10,838

Jan 2022

2,600

₹19,760,000

₹3,754,400

₹3,952,000

₹2,371,200

₹790,400

₹11,780

Feb 2022

2,800

₹22,960,000

₹5,740,000

₹4,362,400

₹459,200

-

₹11,972

4. % Repeat transactions

% Repeat Transactions is by definition the % of acquisitions making a repeat transaction in the next X number of months.

D2C brands should focus heavily on this number as it gives an indication of whether the customers being acquired are coming back again to the brand with/without marketing efforts or not.

If this % is a good number, it would mean that the brand is able to acquire high-quality customers who are more likely to buy again in the future. Customers are more likely to come back to the brand due to the following reasons – Quality, Value For Money (VFM), and customer experience.

If the % is on the lower side, it might be an indicator that the brand is not ranking well on any of the above 3 parameters. Or, if the acquisitions were because of a certain offer, then the brand is getting consumers who are offer-driven and not value driven.

The brand strategy should be to move this needle as much as possible. The majority of brands focus entirely on acquisitions without any strategy for retaining the acquired customers.

Sample Data

Month

Acquisitions

Repeat transactions in next 4 months

% Repeat transactions

Oct 2021

2,800

1,200

43%

Nov 2021

2,600

1,250

48%

Dec 2021

2,500

1,400

56%

Jan 2022

2,600

1,100

42%

Feb 2022

2,800

1,000

36%

5. ROI

ROI stands for Return on Investment and can be mathematically calculated as the Total Revenue divided by Total Cost. 

The effective ROI for the brand is the most crucial metric to gauge the effectiveness of the campaign and helps the brand to understand the overall benefit that they’ve received by undertaking the campaign.

Sample Data

Month

Amount Spent

Revenue

ROI

Oct 2021

₹4,000

₹1,300

33%

Nov 2021

₹5,000

₹1,250

25%

Dec 2021

₹7,000

₹1,400

20%

Jan 2022

₹8,000

₹1,100

14%

Feb 2022

₹6,500

₹2,500

38%

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