Marketing KPIs: Measuring ROI, CAC and ROAS

The marketing KPIs that tie spend to money are ROAS (revenue per rand of ad spend), marketing ROI (profit per rand spent), CAC (cost to win a customer) and cost per lead. ROAS tells you whether a campaign generates revenue; ROI and CAC tell you whether it generates profit. Confusing the two is the most common and most expensive marketing reporting mistake.

The formulas

ROAS vs ROI: a worked example

Say you spend R20,000 on search ads in a month and the campaign is credited with R90,000 of sales. Your gross margin is 40%.

• ROAS: R90,000 ÷ R20,000 = 4.5 (often written 4.5× or 450%).
• Gross profit from those sales: R90,000 × 0.40 = R36,000.
• Marketing ROI: (36,000 − 20,000) ÷ 20,000 = 80%
• Break-even ROAS: 1 ÷ 0.40 = 2.5

So any campaign below a ROAS of 2.5 loses money on the first sale for this business. A second business with a 20% margin would need a ROAS of 5 just to break even, so the same 4.5 ROAS would be a loss. A ‘good’ ROAS depends entirely on your margin, which is why copying someone else’s target is dangerous.

CAC: include the full cost

CAC is often understated because people divide only ad spend by new customers. A more honest blended CAC includes agency fees, marketing tools, content costs and the salaries of people doing marketing and sales. Continuing the example: if total monthly marketing and sales costs are R65,000 and you won 130 new customers, blended CAC = R65,000 ÷ 130 = R500.

Compare CAC with what a customer is worth. If the average customer generates R1,800 of gross profit over their lifetime, LTV:CAC is 3.6, and you are acquiring customers profitably. For subscription businesses, see SaaS metrics: MRR, churn, LTV and CAC; for online stores, see e-commerce KPIs.

Channel-level reporting

Averages hide which channels work. Report the key numbers by channel side by side:

(Example figures only.) Social ads look cheapest per lead, but those leads convert poorly, so CAC is higher than search. Email looks tiny, yet it is the most efficient channel because it reaches people who already know you. Judging channels on CPL alone would lead you to exactly the wrong decision.

Setting a maximum affordable CAC

Work backwards from customer value to set a spending ceiling. If a customer is worth R1,800 of gross profit and you want at least a 3:1 return, your maximum CAC is R600. With a 20% lead-to-customer rate, that means you can afford up to R120 per lead (R600 × 0.20). Now every channel has a clear pass mark: in the table above, search, social and email are under the ceiling, while events at R800 CAC need to improve or be cut back. Revisit the ceiling whenever margin, pricing or repeat rate changes.

Attribution: keep it honest

• Pick one attribution model and stick with it. Last-click, first-click and data-driven models give different answers; switching mid-year breaks comparisons.
• Ad platform numbers tend to be generous. Platforms often credit themselves for sales that would have happened anyway. Reconcile against your own sales or CRM data.
• Watch blended numbers too. Total new customers ÷ total marketing cost is hard to fool and shows whether spend is working overall.
• Allow for lag. B2B deals can close months after the first click, so this month’s CAC may reflect last quarter’s campaigns.

A monthly marketing report

1. Total spend, new customers, blended CAC and trend.
2. ROAS and ROI by paid channel, against break-even ROAS.
3. Leads, CPL and lead-to-customer rate by channel.
4. What was tested, what worked and what will change next month.

If your leads live in HubSpot, our HubSpot sales reporting guide shows how to connect marketing to closed revenue. Summarix can pull from HubSpot, Mailchimp, Shopify, Stripe or a spreadsheet and put these KPIs in one report.

Conclusion

Measure marketing on profit, not just revenue. Work out your break-even ROAS from your margin, include every cost in CAC, report by channel and compare CAC with customer value. Those four habits will tell you where your next R10,000 of marketing budget should go.