As a young startup, marketing opportunities come your way all the time. You'll be aware of many common opportunities (Facebook, Adwords, etc), but you'll also be contacted by invitations to present at conferences, requests for paid listings, partner marketing solicitations, etc. These can be auspicious discoveries, or painful lessons in the importance of conserving capital. To lower the risk of regret, you'll have to have a process for evaluating these new opportunities. In this presentation we'll talk about metrics such as Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) and how they can help you make better choices.

1. Wearable World 2015
How to Evaluate a
Marketing Opportunity

2. In this presentation, we’ll cover:
•“CLV” and “CAC”.
• Setting an estimate for these on Day 1.
• Calculating conversion rates from initial click or contact for
different channels.
• Working backwards to determine if a marketing “opportunity” is
worth it.
• Testing a new marketing channel: setting a time frame & a budget.
• Splitting up an experiment into multiple iterations, so you have
time to learn and optimize before making judgements.

3. Caffeinate
Caffeinate is a wristband that monitors your heart rate and automatically
orders you a coffee when you’re tired. Caffeinate prevents you from being
that guy (up top).
• Average cost of Caffeinate: $139
• Average number of purchases: 1.1
• Average retention time (in years): 1
Meet my fake wearable:

4. Customer Lifetime Value
C.L.V

5. • Customer Lifetime Value measures the profit your
business makes from any customer.
• SaaS CLV Model: (Revenue per paying user per
month) x (Gross Margin) x (Customer Lifetime)
• Commerce CLV Model: (Average Order Value) x
(Number of Repeat Sales) x (Average Retention Time)
x (Gross Margin)
• For wearables & IoT especially, factor in Gross
Margin.

6. • Caffeinate:
• Average cost of Caffeinate: $139
• Average number of purchases: 1.1
• Average retention time (in years): 1
• Gross Margin: 65% (.65)
• E-commerce CLV Model: ($139) x (1.1) x (1) x (.65) =
$99

7. C.A.C
Customer Acquisition Cost

8. • C.A.C = Customer Acquisition Cost
• Traditionally, C.A.C is ALL of your marketing costs:
• (Sales + Marketing Costs, including People, Software,
etc)/ (# of New Customers)
• Today, we’re going to use a simpler C.A.C.
• (Spend on a Marketing Channel) / (# of New
Customers)

9. Good rule of thumb:
CAC ≤ 1/3 LTV

10. • Caffeinate: LTV= $99
• With that LTV, you can have a CAC *up to* $20 - $33

11. Conversion Rates

12. • Ecommerce: Website Visitor -> Paying Customer.
• SaaS: Website visitors -> Signups. Or Leads - > Paying
Customers.
• This will vary by channel! Properly tag all your
campaigns so that you can clearly see who converted
from where.
• Don’t know your conversion rates? Check out
benchmarks in your industry. Some resources on the
last slide.
• Caffeinate has a conversion rate of 2%

13. “Dear Caffeinate,
I’m writing to you from a Marketing Organization in a Related Field
(MORF).
We’re creating a list of the “5 Top Mind-Bending Wearables for Busy
People” and we would like to feature you!
Our Top 5 collections usually get 40,000 views. This is a sponsored
listing to the tune of $3,000. ”
Best,
Fred Staples
Business Development, MORF
We talked on the phone with Mr. Staples and he added that each listing gets a 5% CR on average.

14. • 40,000 views
• 5% click through rate
• = 2,000 people may visit your site
• x 2% conversion rate = 40 purchases
• At a CAC of $20, you could spent $800 to achieve that
• At a CAC of $33, you could spent $1320 to achieve that.
• Either way, both number are <3,000 and it’s not worth it.

15. Testing a Marketing Channel

16. • Adwords
• Facebook Ads
• LinkedIn Ads
• Marketplace Listings / Referrals
• Social Media Marketing
• “Organic” Channels: Blogging+SEO:

17. What’s the minimal amount you can spend with $40 CAC
and a 2% conversion rate to test a channel?
…..It’s actually not that easy. The larger your experiment,
both in time and budget, the more certain you can be of
your results.
You’ll have to draw a line in the sand based on your
resources, your market and what seems reasonable to you.
If you’re in B2C E-commerce, $100 is too little to test a
channel, and $1000 may be too much. If you’re in B2B
SaaS, $1000 is too little to test a channel, and $10,000 is too
much.

18. But…when testing a channel:
• Split your budget up into at least 4 parts, over the course
of at least 4 weeks.
• Take your learnings from the first week and apply them
to the next weeks. It takes time to get something right.
• There are some great tools that will help you with this,
such as AutomateAds: www.automateads.com and
AdStage: www.adstage.io
•This will help you maximize your budget.

19. AutomateAds automatically optimizes your campaigns: it lets you
create many different variations of just about anything you can think
of in your ad, and sends traffic to the top performers.

20. Wearable World 2015
Simona Marie Asinovski
www.simonamarie.com
me@simonamarie.com

21. CAC & LTV
http://blog.hubspot.com/ecommerce/calculating-ecommerce-cost-of-customer-acquisition
http://customerlifetimevalue.co/ (Customer Lifetime Value)
https://segment.com/blog/calculating-customer-acquisition-costs/
http://www.evergage.com/blog/how-calculate-customer-churn-and-revenue-churn/
http://www.forentrepreneurs.com/saas-metrics-2-definitions/
Conversion Rates
http://www.marketingsherpa.com/article/chart/conversion-rates-retail-categories
http://www.wordstream.com/blog/ws/2014/03/17/what-is-a-good-conversion-rate
Digging deeper into conversion rates:
http://www.ecommercefuel.com/average-conversion-
http://www.smartinsights.com/ecommerce/ecommerce-analytics/ecommerce-conversion-rates/