Define Key Metrics

What are some key metrics to consider when planning marketing budget? Identify conversion metrics, CPA targets, and growth goals.

Have just one marketing KPI

Every marketing budget needs to optimize for one key conversion metric. Marketing teams often get confused trying to track multiple metrics at the same time. Focusing on one key metric that directly ties to revenue is the only way for your plan to succeed.

Common conversion metrics by business type include:

  • B2B Tech: MQLs or SQLs (Sales-led), Signups (PLG)
  • B2C Tech: Signups or Purchases
  • Enterprise: SALs
  • E-commerce: Purchases
Having "Lead" as a key metric for marketing is a tricky one. It's really easy to generate low-quality leads that will never convert to MQLs, SQLs or customers. Showcase your true ownership by taking responsibility as CMO for a key metric that is later in the funnel.

Understand your CPA

CPA should always relate to the chosen KPI from the earlier section. Know your target blended CPA for the whole marketing budget and define target CPA for the particular channels.

Blended CPA

Calculate your blended target CPA as: Total marketing spend / Total conversions (in your chosen metric). Assuming that the whole marketing team goals' is working on new customer acquisition, this gives you a realistic benchmark of how much really it costs to acquire a new customer.

This number should decrease in time, meaning that your marketing efforts are becoming more scalable.

Channel-Specific CPAs

Individual channel CPAs are usually much higher than your blended CPA. Also, significant CPA variations between channels are normal and expected.

Example scenario (for conversion MQL in B2B Tech SaaS):

  • PPC CPA: $500
  • Organic CPA: $50
  • Blended CPA: $150

This variation is healthy – expensive channels can still be worth it, if they are included in a healthy channel mix.

LTV and ROI Calculations

Understanding customer Lifetime Value (LTV) is crucial for budget planning and ROI of your actions. Check if there are any major differences between average deal size or LTV across channels. Example: MQLs from PPC might have a lower deal size than industry events.

If your business doesn't acquire thousands of new customers yearly, then don't waste time for LTV breakdown by channel, simply because you don't have enough customers to calculate breakdown averages.

Target a minimum 4:1 ROI for paid channels. This means for every $1 spent, aim to generate at least $4 in lifetime revenue.

Remember: These metrics aren't static. Review them quarterly and adjust based on market changes and your company's growth stage.