- CAC
- What did it cost to acquire a new customer?
- MER
- How much total revenue did you generate per marketing dollar?
- ROAS
- How much attributed revenue did you report per advertising dollar?
- Marketing ROI
- What modeled return remained after variable costs and the marketing investment?
MER and ROAS do not subtract your costs. Marketing ROI here uses the marketing investment as its denominator; the guide explains the scope and assumptions.
Give every number a job
Start with a shared definition. Your team, agency and accounting system may use the same acronym for different costs or revenue. These are the definitions I use here. Keep the reporting period consistent.
| Metric & unit | Calculation | What it helps you see | What it does not establish |
|---|---|---|---|
| CAC / dollars per new customer | Acquisition sales and marketing costs ÷ new paying customers | What acquiring a customer costs | Customer quality, retention or future profit |
| MER / ratio, such as 5× | Recognized net business revenue ÷ total marketing costs | Revenue relative to your whole marketing investment | Which campaign caused a sale or whether the business is profitable |
| ROAS / ratio or percentage | Ad-attributed revenue ÷ ad spend; multiply by 100 for % | Revenue credited to ads per advertising dollar | Return after product, delivery and other business costs |
| Marketing ROI / percentage | (Estimated incremental revenue − variable costs − marketing investment) ÷ marketing investment × 100 | Modeled net return relative to the campaign investment | Causal proof, company-wide net profit or cash collected |
4× ROAS is 400%. It is not 400% profit.
Suppose $2,500 in advertising receives credit for $10,000 of revenue: 4× ROAS, or 400%. If those sales require $7,000 of variable costs, $500 remains after advertising. If the full $10,000 is genuinely incremental and advertising is the entire campaign investment, modeled marketing ROI is $500 ÷ $2,500 = 20%. This is a hypothetical example, not a benchmark.
That incremental-sales assumption matters. Platform attribution assigns credit; it does not establish that every purchase would disappear without the campaign. Estimate the sales above a credible baseline, or use an appropriate controlled experiment. Include creative, fees and campaign labor when relevant, without counting costs twice.
An all-cost ROI can use a different denominator: production plus advertising costs. State your scope before comparing returns. Google conversion values may represent revenue, profit or assigned action values. A value-to-cost column only means revenue ROAS when the underlying value represents revenue.
A lead is not a customer
Cost per action, or CPA, divides spend by the conversion action you selected. That action might be a form submission, phone call or purchase. Ask what counted before treating CPA as CAC. Your customer count should represent new paying customers, with cancellations and refunds handled consistently.
Set a target your business can afford
I would not call your marketing healthy because it beats a generic industry average. First calculate what your sale leaves after variable costs, how much acquisition you can fund and when customers pay. Then set a target that leaves room for overhead, risk and your desired return.
Use industry benchmarks as context. Check the year, country, channel, sample size, median versus average, attribution window, customer definition and included costs. A benchmark from a different margin structure can point you toward the wrong decision.
A useful traffic light explains its rules. Red can flag a modeled loss. Yellow can mean break-even, below your target or missing target information. Green should mean your stated target is met within the entered assumptions. It is a prompt to investigate and decide, not permission to spend without limits.