Most businesses track the wrong metrics. Impressions, clicks, reach – these are vanity metrics that look nice in reports but say nothing about real effectiveness. I’ve seen campaigns with million-level reach that brought zero clients, and campaigns with minimal metrics that generated steady profits.
Choosing the right KPIs is not just a technical question. It determines how you make decisions, where you invest your budget, and whether you achieve your business goals.
Content
Marketing Metric Hierarchy
Vanity Metrics (Showcase Metrics)
Metrics that look good but don’t impact business:
- Easy to screw up
- Does not guarantee engagement
- Does not correlate with sales
- Does not imply interaction
- May be random
- Hard to attribute to sales
- Impressions ≠ attention
- Banner blindness
- Viewability analysis needed
- Surface interaction
- Doesn’t lead to conversions
- Algorithms devalue
Actionable Metrics (Decision-Making Metrics)
Metrics that allow making decisions:
- Shows ad attractiveness
- Benchmark: 2-5% for search, 0.5-1% for display
- Impact: headline, description, CTA
- Cost of attracting a visitor
- Depends on competition and quality
- Optimization through Quality Score
- Percentage of single-page sessions
- Normal: 40-60% for blogs, 20-40% for e-commerce
- Signal of content relevance
- Shows engagement
- Correlates with conversion probability
- Important for content sites
Problem: don’t show final results, can be misleading without context
Metrics that directly impact business:
- Overall investment profitability
- Considers all costs and profit
- Used for strategic decisions
- Revenue relative to ad costs
- Benchmark: 3-5x for most businesses
- For optimizing ad campaigns
- Full cost of acquiring a customer
- Includes marketing, sales, tools
- Compared with LTV
- Total revenue from a customer over time
- Basis for determining acceptable CAC
- Key to long-term strategy
- Final business results
- Goal of all marketing efforts
- Most honest success metric
Key Formulas and Calculations
ROI (Return on Investment)
Formula:
ROI = ((Profit – Investment) / Investment) × 100%
- Marketing costs: $10,000
- Revenue: $50,000
- Profit (after costs): $30,000
- ROI = (($30,000 – $10,000) / $10,000) × 100% = 200%
- Assessing overall marketing effectiveness
- Comparing different channels
- Justifying the budget
ROAS (Return on Ad Spend)
Formula:
ROAS = Ad Revenue / Ad Spend
- Витрати на рекламу: $5,000
- Дохід від реклами: $20,000
- ROAS = $20,000 / $5,000 = 4x (або 400%)
- ROAS 3x — мінімально прийнятний
- ROAS 4-5x — хороший результат
- ROAS 8x+ — відмінний результат
- Evaluation of individual advertising campaigns
- Comparison of creatives, audiences
- Optimizing ad budget
CAC (Customer Acquisition Cost)
Formula:
CAC = Total acquisition costs / Number of new customers
- Marketing and sales costs: $50,000
- Customers acquired: 100
- CAC = $50,000 / 100 = $500
- Ad costs
- Marketers and sales salaries
- Tools and software
- Agency fees
LTV (Lifetime Value)
Formula (simplified):
LTV = Average check × Number of purchases × Customer lifespan
Formula (detailed):
LTV = (Average monthly revenue per customer × Gross Margin) / Churn Rate
- Average Check: $100
- Purchases per Year: 4
- Customer Stays: 3 Years
- LTV = $100 × 4 × 3 = $1,200
LTV:CAC Ratio
The ideal LTV:CAC ratio is 3:1 or higher. This means that a customer brings in three times more than it cost to acquire them over the entire period of cooperation.
If LTV:CAC is less than 1:1, the business is losing money on each customer – this is a critical situation requiring immediate changes. A 1:1 ratio means break-even, where acquisition costs equal customer revenue. At LTV:CAC 2:1 the business operates with low margin, and any market fluctuations can make it unprofitable. A healthy business shows a 3:1 ratio. Interestingly, an LTV:CAC above 5:1 may indicate underinvestment in marketing – you could acquire more customers but are limiting yourself.
CPA (Cost Per Acquisition)
Formula:
CPA = Ad costs / Number of conversions
- Cost: $2,000
- Conversions: 50
- CPA = $2,000 / 50 = $40
- CPA — cost of any conversion (lead, sign-up)
- CAC — cost of the client (buyer)
KPIs by Funnel Stages
TOFU (Top of Funnel) - Awareness
Target metrics for TOFU: a 20% increase in brand search per quarter indicates successful brand awareness building. CPM should be below industry benchmarks for effective budget use.
MOFU (Middle of Funnel) - Consideration
At the consideration stage, track CTR (click-through rate), CPC (cost per click), Engagement Rate (engagement), Time on Site (time on site), and Pages per Session (view depth). These metrics show how interested your audience is.
BOFU (Bottom of Funnel) — Decision
For e-commerce, a normal Conversion Rate is 2-3%. For B2B landing pages, expect 5-10%. ROAS should be above 3x for profitable ads.
Retention (After Purchase)
KPIs for Different Business Types
E-commerce
- ROAS по каналах
- Average Order Value (AOV)
- Cart Abandonment Rate
- Customer Lifetime Value
- Repeat Purchase Rate
B2B / Services
- Cost Per Lead (CPL)
- Lead-to-Customer Rate
- Sales Cycle Length
- CAC Payback Period
- Revenue per Account
SaaS
- Monthly Recurring Revenue (MRR)
- Customer Acquisition Cost (CAC)
- LTV:CAC Ratio
- Churn Rate
- Net Revenue Retention (NRR)
Local business
- Cost Per Store Visit
- Phone Call Rate
- Direction Request Rate
- Booking/Appointment Rate
- Customer Acquisition Cost
Building a Marketing Dashboard
Level 1: Daily Monitoring
- Costs by Channel
- Clicks and Conversions
- CPC, CTR, CPA
- Anomalies and Issues
Level 2: Weekly Analysis
- ROAS by Campaign
- Conversion Trends
- Creative Performance
- A/B Testing
Level 3: Monthly Report
- Marketing ROI
- CAC and LTV
- Achieving business goals
- Recommendations for the next period
Dashboard Tools
- Google Looker Studio — free, Google integration
- Tableau — powerful visualization
- Power BI — for Microsoft ecosystem
- Databox — easy to set up
FAQ
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What's the difference between ROI and ROAS?
ROI (Return on Investment) measures overall investment profitability and considers all costs and profit. ROAS (Return on Ad Spend) measures only revenue relative to ad costs. ROI = 200% means you earned twice as much as you spent. ROAS = 4x means $4 revenue for every $1 spent on ads.
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What ROAS is considered good?
ROAS 3x (300%) - minimum acceptable for most businesses. ROAS 4-5x - good result. ROAS 8x+ - excellent. But target ROAS depends on margin: for 70% margin products, ROAS 2x is sufficient, for 20% margin products, at least ROAS 5x is needed.
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What is the optimal LTV:CAC ratio?
The ideal LTV:CAC ratio is 3:1 or higher. This means a customer brings three times more than it costs to acquire them. A ratio below 1:1 means losses. A ratio above 5:1 may indicate underinvestment in marketing and lost potential growth.
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How to track ROI for brand awareness campaigns?
For brand awareness use proxy metrics: growth in brand search queries, direct traffic, brand mention volume, aided/unaided brand recall (through surveys). Compare these metrics before and after the campaign. Long-term brand awareness reduces CAC and increases conversions.
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Which KPIs are most important for small business?
For small business with limited budgets, focus on: CAC (how much a customer costs), ROAS (ad effectiveness), Conversion Rate (traffic quality), LTV (customer value). Avoid vanity metrics like reach and likes - they don't impact profit.
