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How Much Should I Spend On Marketing?: Listen To Our Podcast To Find Out

Have you ever wondered if you are spending too much or to little on your digital marketing campaign? There is actually a mathematical formula that will help you figure that out. It is known as a Lifetime Value Ratio and it is critical to understand before you make an investment in marketing. Listen to our podcast to find out more. It’s the best 19 minutes you will spend today.

How To Calculate The Lifetime Value Ratio

The first step is knowing the lifetime value of your customer. This is the amount of money this customer will pay you over the course of your relationship with them multiplied by the percentage of your gross margin.

Next, you’ll want to figure out your customer acquisition cost (CAC). This is the amount of money you spend on all of your marketing and sales divided by the number of customers you acquire.

The ratio between the lifetime value of your customer and your CAC is known as your lifetime value ratio (LTVR). This number is important and should be your guide to investing money in your marketing campaigns. Ideally, this number should be 3:1. A 3:1 ratio is evidence that your marketing campaign is working.

This doesn’t mean that a different ratio is wrong, but ideally, your goal should be to properly invest in your marketing in order to achieve this ratio. This ratio should also be one of the major metrics you look at when evaluating your digital marketing, its effectiveness, and your goals.

If you want to know more about where and how your marketing budget should be spent to be effective, check out the next episode of our podcast.

Listen to our other podcasts that continue to explain our 3:18 in 18 Process.

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