Key Marketing Metrics
Five numbers — traffic, conversion rate, CAC, LTV and ROAS — tell you almost everything about whether your marketing is healthy.
What you will learn
- Define the five core marketing metrics
- Calculate each one from simple numbers
- Read a metric and say if it is good or bad
Five numbers every marketer should know
You do not need fifty metrics. Most decisions come down to five. We will use one running example: an online clothing store in India, and work each number out step by step.
1. Traffic
Traffic is simply how many people visited your website or shop. It is the top of the funnel — no visitors, no sales. We measure it as visits over a time period.
Example: the clothing store had 10,000 website visits in May. That is its traffic for the month.
2. Conversion rate
A conversion is when a visitor does the thing you want — usually a purchase. Conversion rate is the percentage of visitors who convert.
Conversion rate = conversions / visitors x 100
= 200 orders / 10,000 visits x 100
= 2%Note: Out of 10,000 visitors, 200 bought something. That is a 2% conversion rate — a typical, healthy number for online retail. If it were 0.2%, something would be scaring buyers away.
3. CAC — Customer Acquisition Cost
CAC is how much you spend on marketing to win one new customer. Lower is better.
CAC = marketing spend / new customers
= ₹50,000 spent / 200 new customers
= ₹250 per customerNote: The store spent ₹50,000 on ads and gained 200 customers, so each new customer cost ₹250 to acquire. Whether that is good depends on how much each customer is worth — which is the next number.
4. LTV — Lifetime Value
LTV (lifetime value) is how much money one customer brings you over the whole time they stay with you — not just the first order.
LTV = average order value x orders per year x years stay
= ₹800 per order x 3 orders a year x 2 years
= ₹4,800Note: A typical customer spends ₹800 per order, buys 3 times a year, and stays about 2 years. So one customer is worth ₹4,800 over their lifetime. Compare that to the ₹250 CAC — you pay ₹250 to earn ₹4,800. That is a strong, profitable business.
5. ROAS — Return On Ad Spend
ROAS tells you how many rupees of sales you get back for every rupee spent on ads. It is written as a ratio.
ROAS = revenue from ads / ad spend
= ₹2,00,000 sales / ₹50,000 spent
= 4x (four rupees back for every rupee spent)Note: The ads brought ₹2,00,000 in sales from ₹50,000 spent, a ROAS of 4x. A ROAS above 1x means the ads earn more than they cost. Most businesses aim for 3x to 4x or higher to cover other costs and still profit.
The five at a glance
| Metric | Question it answers | Good direction |
|---|---|---|
| Traffic | How many people came? | Higher |
| Conversion rate | How many of them acted? | Higher |
| CAC | What did one customer cost? | Lower |
| LTV | What is one customer worth? | Higher |
| ROAS | Rupees earned per rupee spent? | Higher |
Reading all five together
The skill is not just calculating each number — it is reading them as one story. Here is the verdict for our clothing store in May:
Traffic: 10,000 visits -> healthy top of funnel
Conversion rate: 2% -> normal for online retail
CAC: ₹250 per buyer -> cheap to acquire
LTV: ₹4,800 per buyer -> each buyer is very valuable
ROAS: 4x -> ads earn 4 rupees per 1 spent
Verdict: HEALTHY. Spend more on ads — the maths supports growth.Note: No single number tells the story. Traffic is fine, conversion is normal, and the money side is strong: you pay ₹250 to win a customer worth ₹4,800, while ads return 4x. Because LTV hugely beats CAC and ROAS is above target, the safe move is to spend MORE, not less.
Tip: The golden rule: your LTV should be comfortably bigger than your CAC. A common target is LTV at least 3 times CAC. Here it is ₹4,800 vs ₹250 — nearly 19 times, which is excellent.
Watch out: Never look at CAC alone. A ₹250 CAC sounds expensive for a ₹300 product but is a bargain for a customer worth ₹4,800. Always pair CAC with LTV.
Q. A gym spends ₹40,000 on ads and signs up 100 new members. What is its CAC?
✍️ Practice
- A bakery website got 5,000 visits and 150 orders. Calculate its conversion rate.
- A customer spends ₹500 per order, orders 4 times a year, and stays 3 years. Calculate their LTV.
🏠 Homework
- Pick an imaginary shop. Make up sensible numbers and calculate all five metrics for one month. Write one sentence saying if the business looks healthy.