This content was published in the No Best Practices newsletter on 12.11.2021.
One of the most important questions marketers and media buyers need to answer: what KPIs should I use to manage my media spend, and what targets should I assign to those KPIs?
Many organizations will look at a P&L delivered by finance, see that performance marketing is 20% of the budget, and then assign a blended last-click ROAS of 5 to all media spend. That approach is extremely limiting to growth (I covered this in depth in the last newsletter).
Other organizations, typically venture-backed, will set media targets based on cost of acquisition:customer lifetime value ratios. They’ll say something like “the average customer produces a lifetime value of $200, so we can afford to spend $100 to acquire a customer. The only problem with that? There is no standard definition of lifetime value, so this approach often results in unprofitable customer acquisition.
Surely, there must be a better way, right? Yes. Here it is:
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